Ravena Labs $\bullet$ 3,750 Units of Compound Were Produced During the Month

question 132

Multiple Choice

Ravena Labs., Inc. makes a single product which has the following standards: Direct materials: 2.5 ounces at $20 per ounce
Direct labor: 1.4 hours at $12.50 per hour
Variable manufacturing overhead: 1.4 hours at 3.50 per hour
Variable manufacturing overhead is applied on the basis of standard direct labor-hours. The following data are available for October:
$\bullet$ 3,750 units of compound were produced during the month.
$\bullet$ There was no beginning direct materials inventory.
$\bullet$ Direct materials purchased: 12,000 ounces for $225,000.
$\bullet$ The ending direct materials inventory was 2,000 ounces.
$\bullet$ Direct labor-hours worked: 5,600 hours at a cost of $67,200.
$\bullet$ Variable manufacturing overhead costs incurred amounted to $18,200.
$\bullet$ Variable manufacturing overhead applied to products: $18,375.
The variable overhead efficiency variance for October is:

• A) $1,400 Favorable
• B) $1,225 Unfavorable
• C) $1,900 Unfavorable
• D) $2,700 Favorable

---

Definitions:

Average Variable Costs

The total variable costs of production divided by the quantity of output produced.

Fixed Costs

Fixed costs are business expenses that remain constant regardless of the level of production or sales, such as rent, salaries, and insurance.

Average Variable Cost

The total variable cost per unit of output, obtained by dividing total variable costs by the quantity of output.