Your managerial accountant has provided you with the following variance report as it relates to direct labor: Price variance $12,000, favorable Quantity variance ($9,000), unfavorable Total variance $3,000, favorable Select all the reasonable qualitative considerations to this report. The quantity variance indicates that we exceeded our standards for direct labor quantity, and is therefore qualitatively unfavorable. The price variance is qualitatively favorable because it indicates that we are investing in more qualified and experienced employees, and thus have to provide an increased wage rate to compensate for the additional experience. These employees are able to provide our services at a higher quality. The price variance is qualitatively unfavorable because it indicates that we are hiring inexperienced employees. Their inexperience will reduce the quality of the service being provided. The total direct labor variance is qualitatively favorable because it is quantitatively favorable. The quantity variance is qualitatively favorable. Additional direct labor hours were needed due to an increase in demand for our services as a response to a marketing campaign completed in the previous period. The price variance is qualitatively favorable because it is a result of hiring individuals immediately following college graduation, which provides the company an opportunity to teach them our best practices and train them in our quality standards. The quantity variance is qualitatively unfavorable because it indicates that we were required to pay our employees a greater hourly wage than we had previously estimated due to the economy being in a state of high inflation.
Your
| Price variance | $12,000, favorable |
| Quantity variance | ($9,000), unfavorable |
| Total variance | $3,000, favorable |
Select all the reasonable qualitative considerations to this report.
The quantity variance indicates that we exceeded our standards for direct labor quantity, and is therefore qualitatively unfavorable.
The price variance is qualitatively favorable because it indicates that we are investing in more qualified and experienced employees, and thus have to provide an increased wage rate to compensate for the additional experience. These employees are able to provide our services at a higher quality.
The price variance is qualitatively unfavorable because it indicates that we are hiring inexperienced employees. Their inexperience will reduce the quality of the service being provided.
The total direct labor variance is qualitatively favorable because it is quantitatively favorable.
The quantity variance is qualitatively favorable. Additional direct labor hours were needed due to an increase in demand for our services as a response to a marketing campaign completed in the previous period.
The price variance is qualitatively favorable because it is a result of hiring individuals immediately following college graduation, which provides the company an opportunity to teach them our best practices and train them in our quality standards.
The quantity variance is qualitatively unfavorable because it indicates that we were required to pay our employees a greater hourly wage than we had previously estimated due to the economy being in a state of high inflation.
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