The Cheers Company Makes Mugs for Which the Following Standards

question 78

Multiple Choice

The Cheers Company makes mugs for which the following standards have been developed: $\begin{array}{cc}&\text { Standard Inputs } & \text { Standard Frice } \\&\text { Expected for Each } & \text { Expected per } \\&\text { Unit of Output } & \text { Unit of Output }\\\hline\text { Direct materials } & 5 \text { ounces } & \$ 2 \text { per ounce } \\\text { Direct labor } & 1.5 \text { hours } & \$ 8 \text { per hour }\end{array}$ Production of 400 mugs was expected in July, but 440 mugs were actually completed. Direct materials purchased and used were 2,100 ounces at an actual price of $2.20 per ounce.Direct-labor cost for the month was $5,310, and the actual pay per hour was $9.00._____ is the direct-material quantity variance for July.

• A)$220 unfavorable
• B)$220 favorable
• C)$200 unfavorable
• D)$200 favorable

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Definitions:

Petty Cash System

A method for managing small, daily operational expenses through a readily accessible cash fund, requiring regular replenishment and accounting.

Cash Payments

Transactions involving the transfer of cash from one party to another, often in exchange for goods or services.

Journal Entries

The method of recording financial transactions where each transaction is noted in two accounts in the ledger to maintain the accounting equation's balance.

Bank Reconciliation

The process of matching the balances in an entity's accounting records for a cash account to the corresponding information on a bank statement, to ensure accuracy and completeness of the records.