If an Analysis Shows an Unfavorable Labor Rate Variance of $18,000

question 2

Multiple Choice

If an analysis shows an unfavorable labor rate variance of $18,000 and a favorable labor efficiency variance of $10,000,the entry to record the cost of direct labor and related variances would include:

• A)a debit to Labor Rate Variance for $18,000.
• B)a credit to Work in Process inventory for $18,000.
• C)a debit to Labor Efficiency Variance for $10,000.
• D)a debit to Cost of Goods Sold for $10,000.
• E)None of the answer choices is correct.

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Definitions:

Residual Income

The net income an investment or business venture generates above the minimum rate of return.

Minimum Required Rate

The lowest return rate that an investor or project manager would accept for an investment.

Residual Income

Income that remains after all costs and expenses, including minimum required return on investment, have been subtracted.

Operating Assets

Long-term assets used in the operations of a business, including property, plant, and equipment, that generate income.