The Budget for the Month of May Was for 9,000

question 70

Multiple Choice

The budget for the month of May was for 9,000 units at a direct materials cost of $15 per unit. Direct labor was budgeted at 45 minutes per unit for a total of $81,000. Actual output for the month was 8,500 units with $127,500 in direct materials and $77,775 in direct labor expense. The direct labor standard of 45 minutes was obtained throughout the month. Variance analysis of the performance for the month of May would show a(n) : (CMA adapted)

• A) favorable materials efficiency (quantity) variance of $7,500.
• B) favorable direct labor efficiency variance of $1,275.
• C) unfavorable direct labor efficiency variance of $1,275.
• D) unfavorable direct labor price (rate) variance of $1,275.

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Definitions:

Dividends

Payments made by a corporation to its shareholder members; it is the portion of corporate profits paid out to stockholders.

Average Collection Period

The average time it takes for a business to receive payments owed by its customers, indicating the effectiveness of its credit and collection policies.

Balance Sheet

A statement that presents an organization's assets, liabilities, and the equity of its shareholders at a distinct point in time.

Sales On Account

Transactions where goods are sold but payment is deferred to a later date.