The sum of the direct labor rate and efficiency variances is equal to:
A) The Flexible Budget Variance
B) The Split Cost
C) The Standard Cost
D) The Actual Budget Variance
E) None of the above

Question

Quizplus · Accepted Answer

The direct labor rate variance is the difference between the actual direct labor rate and the standard direct labor rate. The direct labor efficiency variance is the difference between the actual direct labor hours and the standard direct labor hours. The sum of these two variances is the direct labor cost variance, which is equal to the flexible budget variance.

The Sum of the Direct Labor Rate and Efficiency Variances