Answer the following statements true (T) or false (F)
1. Managers should look at any variance that is significant.
2. A direct labor efficiency variance is favorable if laborers actually work more hours than the flexible budget calls for to produce the actual quantity of output.
3. A direct labor cost variance is unfavorable if the employer pays workers more per hour than budgeted.
4. When investigating variable overhead variances, management needs to determine whether cost increases were controllable or if the cost standard needs to be updated.
5. In a standard cost system, the standard overhead allocation rate replaces the predetermined
overhead allocation rate but the concept is the same.
1. TRUE
2. FALSE - Explanation: A direct labor efficiency variance is favorable if laborers actually work fewer hours than the flexible budget calls for to produce the actual quantity of output.
3. TRUE
4. TRUE
5. TRUE
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