Reference: 11-11
the Clark Company Makes a Single Product and Uses

question 40

Multiple Choice

Reference: 11-11
The Clark Company makes a single product and uses standard costing. Variable overhead is assigned to production on the basis of direct labour hours. Some data concerning this product for the month of May follow: $$\begin{array} { | l | l | l | } \hline \text { Labour rate variance: } & \$ 7,000 & \mathrm {~F} \\\hline \text { Labour efficiency variance: } & \$ 12,000 & \mathrm {~F} \\\hline \text { Variable overhead efficiency variance: } & \$ 4,000 & \mathrm {~F} \\\hline \text { Number of units produced: } & 10,000 & \\\hline \text { Standard labour rate per direct labour hour: } & \$ 12 & \\\hline \text { Standard variable overhead rate per direct labour hour: } & \$ 4 & \\\hline \text { Actual labour hours used: } & 14,000 & \\\hline \text { Actual variable manufacturing overhead costs: } & \$ 58,290 & \\\hline\end{array}$$
-Which of the following is not correct

• A)If the denominator level of activity is greater than the standard hours allowed for the output of the period, then the volume variance is unfavourable.
• B)If the denominator level of activity and the standard hours allowed for the output of the period are the same, then there is no volume variance.
• C)If the denominator level of activity is greater than the standard hours allowed for the output of the period, then the volume variance is favourable.
• D)The volume variance is an appropriate measure of the utilization of plant facilities.

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Definitions:

Linear Relationship

A type of relation between two variables where the change in one variable is directly proportional to the change in another variable.

Cross-Classification Table

A table that displays the frequency distribution of variables to show how they are distributed across each other.

Nominal Variables

Categories without a natural order or rank, such as gender, race, or religion, used for labeling variables.

Interval Variables

Variables measured along a scale in which the intervals between values are interpretable, but without a true zero point.