Firecracker Company Has Developed the Following Standards for One of Its

question 29

Multiple Choice

Firecracker Company has developed the following standards for one of its products. $\begin{array}{ll}\text { Direct materials: } & 15 \text { pounds } \times \$ 16 \text { per pound } \\\text { Direct labor: } & 4 \text { hours } \times \$ 24 \text { per hour } \\\text { Variable manufacturing overhead: } & 4 \text { hours } \times \$ 14 \text { per hour }\end{array}$
$\text { The following activity occurred during the month of October: }$

$\begin{array}{ll}\text { Materials purchased: } & 10,000 \text { pounds costing } \$ 170,000 \\\text { Materials used: } & 7,200 \text { pounds } \\\text { Units produced: } & 500 \text { units } \\\text { Direct labor: } & 2,300 \text { hours at } \$ 23.60 / \text { hour } \\\text { Actual variable manufacturing overhead: } & \$ 30,000\end{array}$ The company records materials price variances at the time of purchase. The direct materials price variance is

• A)$50,000 favorable.
• B)$50,000 unfavorable.
• C)$10,000 favorable.
• D)$10,000 unfavorable.

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Definitions:

Critical Values

Specific points on a statistical distribution that are used to decide whether to reject the null hypothesis in hypothesis testing.

Materials Account

An account used to track the cost of raw materials that are bought and used during production processes.

Debit

An accounting entry that results in either an increase in assets or a decrease in liabilities on a company’s balance sheet.

Labour Efficiency Variance

The difference between the actual hours worked and the standard hours allowed for the work performed, often used to assess workforce productivity.