TaskMaster Enterprises Employs a Standard Cost System in Which Direct

question 72

Multiple Choice

TaskMaster Enterprises employs a standard cost system in which direct materials inventory is carried at standard cost. TaskMaster has established the following standards for the prime costs of one unit of product.
$\begin{array}{lclr}&\text { Standard } & \text { Standard } & \text { Standard } \\&\text { Quantity } & \text { Price } & \text { Cost }\\\text { Direct Materials } & \text { 8pounds } & \$ 1.80 \text { per pound } & \$ 14.40 \\\text { Direct Labor } & 0.25 \text { hour } & \$ 8.00 \text { per hour } & \underline{2.00}\\&&& \underline{\$16.40}\end{array}$


During November, TaskMaster purchased 160,000 pounds of direct materials at a total cost of $304,000. The total factory wages for November were $42,000, 90% of which were for direct labor. TaskMaster manufactured 19,000 units of product during November using 142,500 pounds of direct materials and 5,000 direct labor hours.
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Is the direct labor rate variance favorable or unfavorable?

• A) Favorable
• B) Unfavorable

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Definitions:

Paid in Capital

The portion of the shareholders' equity that represents the amount investors have put into the company by purchasing shares directly from the company.

Common Stock

Represents ownership shares in a corporation, providing voting rights and a residual claim on corporate earnings in the form of dividends.

Subscription Receivable-common Stock

An amount due from subscribers for shares in common stock, which has not yet been paid.

Subscription Receivable-common Stock

An amount due from subscribers who have agreed to purchase common stock but have not yet paid.