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Hi John,
Which of the following is not a likely cause of adverse labour rate of pay variance?
1. Overtime having been worked
2. using more skilled workers
3. Buying less expensive material
4. Buying more expensive materialCould you please explain the relevance of point 1, 3 and 4?
Thanks,
NitinIf they work overtime then they will be paying a higher rate per hour and there will therefore be a labour rate variance.
This is one the questions in section A of the open tuition mock exam. The suggested answer says option 4 doesn’t impact but rest does so I am confused now.
I have no idea why you should now be confused!!
Option 1 will be a likely cause – I have explained why in my previous reply.
Option 2 will be a likely cause – you did not ask about option 2 and I assume that is because it was the most obvious.
Option 3 might be a likely cause – the reason is that buying less expensive material might mean it is less good material and so harder to work on and therefore mean paying the workers more.
Option 4 is not a likely cause (for the opposite reason to option 3)
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