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

question 64

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. $$\begin{array} { | l | l | l | } \hline \text { Units produced } & 600 & \\\hline \text { Direct material used } & 2,000 & \mathrm {~kg} \\\hline \text { Direct material purchased } ( 3,000 \mathrm {~kg} ) & \$ 11,400 & \\\hline \text { Direct labour cost } ( 1,100 \text { hrs. } ) & \$ 9,240 & \\\hline \text { Variable manuf. overhead cost incurred } & \$ 5,720 & \\\hline\end{array}$$ The company applies variable manufacturing overhead to products on the basis of direct labour hours.
-A favourable material price variance coupled with an unfavourable material usage variance would most likely result from:

• A)the purchase of low quality materials.
• B)problems with labour efficiency.
• C)changes in the product mix.
• D)problems with processing machines.

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Definitions:

Management Skill

The capabilities and competencies that allow an individual to effectively direct, control, and administer tasks, resources, and people.

Job Performance

The manner and efficiency with which an individual fulfills their work roles and responsibilities.

Authority

The power or right to give orders, make decisions, and enforce obedience.

Energy

Pertains to the capacity for vigorous activity and the power to do work, essential for both physical and mental tasks.