Reference: 11-02
the Litton Company Has Established Standards as Follows

question 100

Multiple Choice

Reference: 11-02
The Litton Company has established standards as follows:
Direct material 3 kg @ $4/kg = $12 per unit
Direct labour 2 hrs. @ $8/hr. = $16 per unit
Variable manuf. overhead 2 hrs. @ $5/hr. = $10 per unit
Actual production figures for the past year are given below. The company records the materials price variance when materials are purchased. $$\begin{array} { | l | l | l | } \hline \text { Units produced } & 600 & \\\hline \text { Direct material used } & 2,000 & \mathrm {~kg} \\\hline \text { Direct material purchased } ( 3,000 \mathrm {~kg} ) & \$ 11,400 & \\\hline \text { Direct labour cost } ( 1,100 \mathrm { hrs } . ) & \$ 9,240 & \\\hline \text { Variable manuf. overhead cost incurred } & \$ 5,720 & \\\hline\end{array}$$ The company applies variable manufacturing overhead to products on the basis of direct labour hours.
-The following labour standards have been established for a particular product: $$\begin{array}{l}\begin{array} { | l | l | } \hline \text { Standard labour hours per unit of output } & 8.3 \text { hours } \\\hline \text { Standard labour rate } & \$ 12.10 \text { per hour } \\\hline\end{array}\\\text { The following data pertain to operations concerning the product for the last month: }\\\begin{array} { | l | l | } \hline \text { Actual hours worked } & 6,100 \text { hours } \\\hline \text { Actual total labour cost } & \$ 71,370 \\\hline \text { Actual output } & 900 \text { units } \\\hline\end{array}\end{array}$$ What is the labour efficiency variance for the month?

• A)$16,029 F.
• B)$19,017 F.
• C)$16,577 F.
• D)$19,017 U.

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Definitions:

Merchandise

Products or goods that are bought, sold, or traded in the retail or wholesale market.