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

question 59

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. $$\begin{array} { | l | l | l | } \hline \text { Units produced } & 600 & \\\hline \text { Direct material used } & 2,000 & \mathrm {~kg} \\\hline \text { Direct material purchased } ( 3,000 \mathrm {~kg} ) & \$ 11,400 & \\\hline \text { Direct labour cost (1,100 hrs.) } & \$ 9,240 & \\\hline \text { Variable manuf. overhead cost incurred } & \$ 5,720 & \\\hline\end{array}$$ The company applies variable manufacturing overhead to products on the basis of direct labour hours.
- $$\begin{array} { | l | l | l | } \hline & \text { Food Costs } & \text { Supervisory Salaries } \\\hline \text { A } & \text { Yes } & \text { Yes } \\\hline \text { B } & \text { Yes } & \text { No } \\\hline \text { C } & \text { No } & \text { Yes } \\\hline \text { D } & \text { No } & \text { No } \\\hline\end{array}$$

• A)Choice A.
• B)Choice B.
• C)Choice C.
• D)Choice D.

---

Definitions:

Valid Inference

A logical conclusion drawn from premises that are accepted as true, ensuring the conclusion necessarily follows from them.

Copernicus

A Renaissance mathematician and astronomer who formulated a model of the universe that placed the Sun rather than the Earth at its center.

Sound Argument

An argument with true premises that also passes the Test of Logical Strength.

Valid

Sound or well-founded; logically correct and acceptable.