Actual Direct Labor Costs May Differ from the Flexible Budget

question 37

Multiple Choice

Actual direct labor costs may differ from the flexible budget amounts because

• A)the company may set a standard wage rate, and the market forces may require a change in that rate.
• B)employees may be compensated based on the number of units produced.
• C)the labor contract may require a higher wage rate than what the company is paying.
• D)employees always operate at the desired efficiency level.

---

Definitions:

Subscription Price

The price at which existing shareholders are allowed to buy additional shares of a company, usually at a discount.

Initial Public Offering (IPO)

The process by which a private company offers shares of stock to the public for the first time to raise capital.

Underwriter

A professional or company that assesses and accepts the risk of another party, often used in insurance and securities issuing.