The Following Information Summarizes the Standard Cost for Producing One

question 136

Multiple Choice

The following information summarizes the standard cost for producing one metal tennis racket frame at Spaulding Industries. In addition, the variances for one month's production are given. Assume that all inventory accounts have zero balances at the beginning of the month.
$\begin{array}{lcc}&\text { Standard Cost Per }&\text {Standard Monthly }\\&\text { Uunit}&\text { Costs}\\\text { Materials } & \$ 4.00 & \$ 8,400 \\\text { Direct Labor 2 hrs @ \$2.60 } & 5.20 & 10,920\\\text { Factory Overhead: } & & \\\text { Variable } & 1.80 & 3,780 \\\text { Fixed } & \underline{5.00} & \underline{10,500}\\& \underline{\$16.00}& \underline{\$33,600}\end{array}$

$\begin{array}{llrl}\text { Variances: }\\\text { Material price } & \$ 244.75 & \text { unfavorable } \\\text { Material quantity } & \$ 500.00 & \text { unfavorable } \\\text { Labor rate } & \$ 520.00 & \text { favorable } \\\text { Labor efficiency } & \$ 2,080.00 & \text { unfavorable }\end{array}$
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What were the actual direct labor hours worked during the month?

• A) 5,000
• B) 4,800
• C) 4,200
• D) 4,000

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Definitions:

Transformation

The process of changing or converting one form or state of something into another, often seen in manufacturing and industry.

Opportunity Cost

The cost of forgoing the next best alternative when making a decision or choosing to consume or produce one good or service over another.

Ppf

The Production Possibility Frontier, a curve depicting the maximum output possibilities for two goods, given available resources and technology.

Efficiently

The method of performing or functioning in the best possible manner with the least waste of time and effort.