Ingredient A12H Is a Material Used to Make Calvin Corporation's

question 60

Multiple Choice

Ingredient A12H is a material used to make Calvin Corporation's major product. The standard cost of Ingredient A12H is $23.00 per ounce and the standard quantity is 3.8 ounces per unit of output. Data concerning the compound for October appear below:
$\begin{array}{lr} \text {Cost of material purchased in October } & \text { \$23.10per ounce } \\ \text {Material purchased in October } & \text { 2,300 ounces} \\ \text { Material used in production in October } & \text { 2,120 ounces} \\ \text { Actual output in October } & \text { 600 units} \\\end{array}$

The material was purchased on account and Calvin Corporation uses a standard costing system.
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The Material Efficiency Variance for October would be recorded as a:

• A) credit of $3,680.
• B) debit of $4,140.
• C) credit of $4,140.
• D) debit of $3,680.

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Definitions:

Explicit Costs

Dollar costs incurred by business firms, such as wages, rent, and interest.

Implicit Costs

The opportunity costs that are not directly incurred but represent the loss of alternative benefits when choosing one option over another.

Explicit Costs

Direct, out-of-pocket payments for goods and services required to run a business.

Accounting Profit

Sales minus explicit cost. Implicit costs are not considered.