Question

Unfavorable labor rate variances may occur as a result of:

Multiple Choice

• Unskilled workers being assigned to a task that requires a set of skills.

• Work interruptions caused by faulty equipment.

• High skilled experienced workers being assigned to jobs requiring little skill.

• The purchase of inferior materials that result in more product defects.

Answer 1

Answer:

Option C

Explanation:

Labour rate variance = [Standard rate (-) Actual rate] * Actual hours

Unfavorable labour rate variance results in a situation when actual rate is more than standard rate.

When highly skilled and experienced workers are given small tasks, they are paid more than what the work actually requires. So, this results in more labor rate than the standard labor rate, which causes unfavorable rate variance.

Also, work interruptions caused and unskilled workers result in more hours worked than the standard required.

Purchase of inferior materials result in material variances and not labor variances.

Hence,

Option 'C' is correct and rest all are incorrect.

In case of any clarification or doubt, please feel free to comment.