BUS105: Managerial Accounting

Jerry's Ice Cream wants to know why there are cost overruns for direct labor. This section considers another significant factor of variance: direct labor. Like direct material variance, direct labor variance has two possible causes: labor rate variance and labor efficiency variance. As with materials, any variance in this cost category from the master budget can be accounted for. Attribution of the variance to its cause(s) is critical to management decisions.