alleryStart learning →Paying workers less per hour than the standard rate produces which variance?
AUnfavorable time variance
BFavorable rate variance
CUnfavorable rate variance
DFavorable time variance
Answer & Solution
Correct answer: B. Favorable rate variance
1. Identify the labour component and the direction.
2. Direct labor may have a variance in the rate paid to workers.
3. It may also have a variance in the amount of time used.
4. Here the rate differs, not the time.
5. Spending less than the standard is favorable, so it is a favorable rate variance.
_Source: OpenStax Principles of Accounting, Volume 2: Managerial Accounting (CC BY-NC-SA 4.0), Ch 8 'Standard Costs and Variances'_
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