Question

1. if the mix of employee's is such that higher skilled, better paid workers are employed than expected:

		The result would be a favorable direct labor price (rate) variance because they work can produce more units in the same amount of time
		The result would be an unfavorable direct labor price (rate) variance
		This would automatically mean that there will be a unfavorable variance for variable manufacturing overhead if manufacturing overhead is based on direct labor
		This will result in a favorable direct materials price variance

2. A direct materials price variance should be computed:

		when materiasl were purchased
		based upon the amount of materials used in production when only a portion of materials purchased is actually used
		when materials are used in production
		based upon the difference between the actual quantily of inputs and the standard quantity allowed for output times the standard price

Answer 1

1). Answer is b). The result would be an unfavorable direct labor price (rate) variance.

It is because higher skilled labor will get paid at higher wages and that makes the average actual labor rate higher than the standard rate and will result in unfavorable variance of direct labor price variance.

2). Answer is a). when materials were purchased.

Direct material price variance is calculated when material are purchased and there is difference between the standard rate and actual rate of material.