Reference: 11-04
Cole Laboratories Makes and Sells a Lawn Fertilizer

question 66

Multiple Choice

Reference: 11-04
Cole laboratories makes and sells a lawn fertilizer called Fastgro. The company has developed standard costs for one bag of Fastgro as follows: $$\begin{array} { | l | l | l | } \hline & \text { Standard Quantity } & \begin{array} { l } \text { Standard Cost per } \\\text { Bag }\end{array} \\\hline \text { Direct material } & 20 \text { grams } & \$ 8.00 \\\hline \text { Direct labour } & 0.1 \text { hours } & \$ 1.10 \\\hline \text { Variable manuf. overhead } & 0.1 \text { hours } & \$ 0.40 \\\hline\end{array}$$ The company had no beginning inventories of any kind on Jan. 1. Variable manufacturing overhead is applied to production on the basis of direct labour hours. During January, the following activity was recorded by the company:
Production of Fastgro: 4,000 bags
Direct materials purchased: 85,000 grams at a cost of $32,300
Direct labour worked: 390 hours at a cost of $4,875
Variable manufacturing overhead incurred: $1,475
Inventory of direct materials on Jan. 31: 3,000 grams
-The terms "standard quantity allowed" or "standard hours allowed" mean:

• A)the standard output in units multiplied by the standard input allowed.
• B)the actual output in units multiplied by the standard input allowed.
• C)the actual input in units multiplied by the standard output allowed.
• D)the actual output in units multiplied by the standard output allowed.

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Definitions:

Factor B

In experimental designs, it refers to the second independent variable being studied for its effect on the dependent variable.

Mean Square

A statistical measure calculated by dividing the sum of squares by the degrees of freedom, often used in variance analysis.

Interaction Effect

A phenomenon in statistical analysis indicating that the effect of one variable on a certain outcome depends on the level of another variable.

Levels

Distinct categories or values that independent or dependent variables can take in a study or experiment.