Miller Company Planned to Produce 3,000 Units of Its Single

question 115

Multiple Choice

Miller Company planned to produce 3,000 units of its single product, Tallium, during November. The standards for one unit of Tallium specify six pounds of materials at $0.30 per pound. Actual production in November was 3,100 units of Tallium. There was a favorable materials price variance of $380 and an unfavorable materials quantity variance of $120. Based on these variances, one could conclude that: (CMA adapted)

• A) more materials were purchased than were used.
• B) more materials were used than were purchased.
• C) the actual cost per pound for materials was less than the standard cost per pound.
• D) the actual usage of materials was less than the standard allowed.

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Definitions:

Incremental Cost

The additional cost that is incurred when the production volume is increased by one unit.

Relevant Cost

Costs that should be considered when making decisions because they will be affected by the decision.

Incremental Analysis

The process of evaluating the financial consequences of making changes in business activities, by focusing on the costs and benefits that will change as a result.

Accumulated Depreciation

The total depreciation for a fixed asset that has been charged to expense since that asset was acquired and made available for use.