A company receives an unusually high number of orders in a month. To produce all of the orders within the scheduled dates of delivery, the company pays employees an extra $8 per hour for every hour of overtime the employees work. Which of the following variances may be directly impacted?
A)Direct materials price variance
B)Direct materials quantity variance
C)Direct labor efficiency variance
D)Direct labor rate variance

Question

Quizplus · Accepted Answer

The extra payout for overtime work directly impacts the direct labor rate variance. The rate variance is calculated by comparing the actual rate paid to the standard rate, and the extra $8 per hour will increase the actual rate paid, leading to a potential unfavorable rate variance. The other variances are related to direct materials and are not affected by the overtime pay for direct labor.

A Company Receives an Unusually High Number of Orders in a Month