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

question 115

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

• A)the difference between actual fixed overhead cost and applied fixed overhead cost.
• B)the difference between budgeted fixed overhead cost and applied fixed overhead cost.
• C)the difference between budgeted fixed overhead cost and standard fixed overhead cost.
• D)the difference between budgeted fixed overhead cost and actual fixed overhead cost.

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