Biscuit Company Has Developed the Following Standards for One of Its

question 69

Multiple Choice

Biscuit Company has developed the following standards for one of its products. Direct labor hours is the driver used to assign overhead costs to products. $\begin{array}{ll}\text { Direct materials: } & 10 \text { pounds } \times \$ 3 \text { per pound } \\\text { Direct labor: } & 2.5 \text { hours } \times \$ 8 \text { per hour } \\\text { Variable manufacturing overhead: } & 2.5 \text { hours } \times \$ 2 \text { per hour }\end{array}$

$\text { The following activity occurred during the month of June: }$

$\begin{array}{ll}\text { Materials purchased: } & 125,000 \text { pounds at } \$ 2.60 \text { per pound } \\\text { Materials used: } & 110,000 \text { pounds } \\\text { Units produced: } & 10,000 \text { units } \\\text { Direct labor: } & 24,000 \text { hours at } \$ 7.50 \text { per hour } \\\text { Actual variable manufacturing overhead: } & \$ 51,000\end{array}$ The company records materials price variances at the time of purchase.
The direct labor efficiency variance is

• A)$8,000 unfavorable.
• B)$8,000 favorable.
• C)$20,000 unfavorable.
• D)$20,000 favorable.

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Definitions:

Basic Accounting Equation

An equation representing the relationship between assets, liabilities, and owner's equity: Assets = Liabilities + Owner's Equity.

Owner's Equity

The residual interest in the assets of the entity after deducting liabilities, essentially representing the owner’s share of the company.

Consulting Revenues

Income generated by a firm through the provision of advisory or consultancy services.

Additional Investment

Extra funds invested into a business by its owners or shareholders over and above the initial or previous investments.