Question

LO 8.3When is the direct labor time variance favorable?

when the actual quantity used is greater than the standard quantity
when the actual quantity used is less than the standard quantity
when the actual price paid is greater than the standard price
when the actual price is less than the standard price

Answer 1

The correct answer is letter "D": when the actual price is less than the standard price.

Step-by-step explanation:

Direct labor rate variance compares the existing direct labor costs and normal direct labor costs over the same operating period. Favorable variance in the labor rate can be caused by hiring more unskilled employees, reducing the minimum wage, and incorrectly setting indirect labor costs. Favorable variance takes place when the costs of direct labor are efficient or lower compared to the standard.