Question

Cake Lady Bakery is famous for its pound cakes. The main ingredient of the cakes is flour, which Cake Lady purchases by the pound. In addition, the production requires a certain amount of direct labor. Cake Lady uses a standard cost system, and at the end of the first quarter, there was an unfavorable direct labor cost variance. Which of the following is a logical explanation for that variance?

Select one:

A. The cost of workers' medical insurance plans jumped up dramatically during the quarter.

B. The production staff changed the work flow process so that production required fewer direct labor hours.

C. The purchasing manager was able to secure a volume discount on flour, purchasing the flour for less than the amount set by standard.

D. The factory lost two experienced workers at the beginning of the quarter, and their replacements wasted a large amount of direct materials during their training period.

Answer 1

The cost of workers' medical insurance plans jumped up dramatically during the quarter is a logical explanation for unfavorable direct labor cost variance

Increase in cost of workers' medical insurance plan increases actual direct labor costs than standard cost leading to unfavorable variance.

Option A is correct