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

question 116

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.
-Information on Kennedy Company's direct material costs follows: $$\begin{array} { | l | l | l | } \hline \text { Standard price per gram of raw materials } & \$ 3.60 & \\\hline \text { Actual quantity of raw materials purchased } & 1,600 & \text { grams } \\\hline \text { Standard quantity allowed for actual production } & 1,450 & \text { grams } \\\hline \text { Materials purchase price variance-favourable } & \$ 240 & \\\hline\end{array}$$ What was the actual purchase price per unit, rounded to the nearest penny?

• A)$3.75.
• B)$3.06.
• C)$3.11.
• D)$3.45.

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Definitions:

Estimated Property Taxes

An approximation of the property taxes due on real estate, often used for budgeting or accounting purposes before the actual tax bill is received.

Modified Cash Basis

An accounting method that combines elements of both accrual and cash basis accounting, recording some transactions on an accrual basis and others on a cash basis.

Modified Cash Basis

It is an accounting method that combines elements of the cash basis and accrual basis, recording income when received but expenses when incurred.