Horizon Marine Stores Company manufactures special metallic materials and decorative fittings for luxury yachts that require highly skilled labor
Horizon uses standard costs to prepare its flexible budget. For the first quarter of the year, direct materials and direct labor standards for one of their popular products were as follows:
Direct materials: 4 pounds per unit; $4 per pound
Direct labor: 4 hours per unit; $15 per hour
Horizon produced 5,000 units during the quarter. At the end of the quarter, an examination of the labor costs records showed that the direct labor cost variance was $6,000 F. Which of the following is a logical explanation for this variance?
A) The company used fewer labor hours than allowed by the standards.
B) The company paid a lower cost per hour for labor than allowed by the standards.
C) The company used a lower quantity of direct materials than allowed by the standards.
D) The company paid a lower cost for the direct materials than allowed by the standards.
B
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