In Considering Whether to Accept a Special Order at a Price

question 87

Multiple Choice

In considering whether to accept a special order at a price less than the normal selling price of the product and where the additional sales will make use of present idle capacity, which of the following costs will not be relevant?

• A)direct labor.
• B)direct materials.
• C)variable manufacturing overhead.
• D)fixed manufacturing overhead that cannot be avoided.

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Definitions:

Labor Rate Variance

The difference between the actual labor costs incurred and the expected (or standard) labor costs, often due to paying a higher or lower wage rate than planned.

Variable Overhead Rate Variance

The difference between the actual variable overhead incurred and the expected (standard) variable overhead allocated based on activity levels.

Labor Efficiency Variance

The difference between the actual hours worked and the standard hours expected to produce a certain level of output, multiplied by the standard labor rate.

Labor Rate Variance

The difference between the actual cost of labor and the expected (or standard) cost, often used in manufacturing to measure efficiency and cost management.