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

question 97

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.
$\begin{array} { | l | l | l | } \hline\quad\quad\quad&\quad\quad\quad&\quad\quad\\\hline\quad\quad\quad&\quad\quad\quad&\quad\quad\\\hline\quad\quad\quad&\quad\quad\quad&\quad\quad\\\hline\quad\quad\quad&\quad\quad\quad&\quad\quad\\\hline\quad\quad\quad&\quad\quad\quad&\quad\quad\\\hline\quad\quad\quad&\quad\quad\quad&\quad\quad\\\hline\end{array}$
Units produced 600
Direct material used 2,000 kg
Direct material purchased (3,000 kg) $11,400
Direct labour cost (1,100 hrs.) $ 9,240
Variable manuf. overhead cost incurred $ 5,720
The company applies variable manufacturing overhead to products on the basis of direct labour hours.
-The labour efficiency variance is?

• A)$840 F.
• B)$840 U.
• C)$800 U.
• D)$800 F.

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Definitions:

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