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Handley Manufacturing Company has prepared the following flexible budget for August and is in the process of interpreting the variances. F denotes a favorable variance and U denotes an unfavorable variance. Material A Material B Flexible Variances Budget Price Efficiency $50,000 $2,000F $4,000U 62,000 300U 1,600F Direct manufacturing labor 80,000 700U 2,300F The most likely explanation of the above direct manufacturing labor variances is that: A. the average wage rate paid to employees was less than expected. B. the company may have assigned more experienced employees this month than originally planned. C. management may have a problem with budget slack and might be using lax standards for both labor-wage rates and expected efficiency. D. employees did not work as efficiently as expected to accomplish the job.

Handley Manufacturing Company has prepared the following flexible budget for August and is in the process of interpreting the variances. F denotes a favorable variance and U denotes an unfavorable variance. Material A Material B Flexible Variances Budget Price Efficiency $50,000 $2,000F $4,000U 62,000 300U 1,600F Direct manufacturing labor 80,000 700U 2,300F The most likely explanation of the above direct manufacturing labor variances is that: A. the average wage rate paid to employees was less than expected. B. the company may have assigned more experienced employees this month than originally planned. C. management may have a problem with budget slack and might be using lax standards for both labor-wage rates and expected efficiency. D. employees did not work as efficiently as expected to accomplish the job.

FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Handley Manufacturing Company has prepared the following flexible budget for August and is in the process of interpreting the variances. F denotes a favorable variance and U denotes an unfavorable variance. Material A Material B Flexible Variances Budget Price Efficiency $50,000 $2,000F $4,000U 62,000 300U 1,600F Direct manufacturing labor 80,000 700U 2,300F The most likely explanation of the above direct manufacturing labor variances is that: A. the average wage rate paid to employees was less than expected. B. the company may have assigned more experienced employees this month than originally planned. C. management may have a problem with budget slack and might be using lax standards for both labor-wage rates and expected efficiency. D. employees did not work as efficiently as expected to accomplish the job.
Transcribed Image Text:Handley Manufacturing Company has prepared the following flexible budget for August and is in the process of interpreting the variances. F denotes a favorable variance and U denotes an unfavorable variance. Material A Material B Flexible Variances Budget Price Efficiency $50,000 $2,000F $4,000U 62,000 300U 1,600F Direct manufacturing labor 80,000 700U 2,300F The most likely explanation of the above direct manufacturing labor variances is that: A. the average wage rate paid to employees was less than expected. B. the company may have assigned more experienced employees this month than originally planned. C. management may have a problem with budget slack and might be using lax standards for both labor-wage rates and expected efficiency. D. employees did not work as efficiently as expected to accomplish the job.
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