Reference: 11-01
Bryan Company Employs a Standard Cost System in Which

question 102

Multiple Choice

Reference: 11-01
Bryan Company employs a standard cost system in which direct materials inventory is carried at standard cost. Bryan has established the following standards for the prime costs of one unit of product: $$\begin{array} { | l | c | l | c | } \hline & \text { Standard Quantity } & \text { Standard Price } & \text { Standard Cost } \\\hline \text { Direct materials } & 6.0 \text { grams } & \$ 3.50 / \text { gram } & \$ 21.00 \\\hline \text { Direct labour } & 1.3 \text { hours } & \$ 11.00 / \text { hour } & 14.30 \\\hline & & & \$ 35.30 \\\hline\end{array}$$ During March, Bryan purchased 165,000 grams of direct material at a total cost of $585,750. The total factory wages for March were $400,000, 90 percent of which were for direct labour. Bryan manufactured 25,000 units of product during March using 151,000 grams of direct material and 32,000 direct labour hours.
-In which of the following situations would the use of a standard cost system to control labour costs not necessarily yield useful results?

• A)A business is employing responsibility accounting.
• B)The bookkeeping systems charges materials, labour and overhead costs to work-in process inventory using standard costs.
• C)In addition to the full monthly standard cost reports the business uses a system where variances are estimated on weekly basis.
• D)The pace of production is constrained by machine processing speeds.

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Definitions:

Working Capital

The difference between a company's current assets and current liabilities, indicating the short-term financial health and operational efficiency.

Cost of Goods Sold

The direct costs attributable to the production of the goods sold by a company, including materials and labor.

Sales

The total amount of goods or services sold by a company, contributing to its revenue.

Sunk Cost

A cost that has already been incurred and cannot be recovered, which should not affect future business decisions.