Biscuit Company Has Developed the Following Standards for One of Its

question 88

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 rate variance is

• A)$12,000 favorable.
• B)$8,000 favorable.
• C)$12,000 unfavorable.
• D)$8,000 unfavorable.

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Definitions:

Limited Liability Company

A business structure that combines the pass-through taxation of a partnership or sole proprietorship with the limited liability of a corporation.

Tax Treatment

The specific methodology applied to determine the amount of taxes owed by an individual or business.

Limited Liability

A legal structure where a company's owners are not personally liable for the company's debts or liabilities.

Partnership

A sanctioned form of business collaboration among two or more persons who equally participate in managing the business and dividing its profits.