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

question 13

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: $$\begin{array} { | l | l | l | } \hline \text { Labour rate variance: } & \$ 7,000 & \mathrm {~F} \\\hline \text { Labour efficiency variance: } & \$ 12,000 & \mathrm {~F} \\\hline \text { Variable overhead efficiency variance: } & \$ 4,000 & \mathrm {~F} \\\hline \text { Number of units produced: } & 10,000 & \\\hline \text { Standard labour rate per direct labour hour: } & \$ 12 & \\\hline \text { Standard variable overhead rate per direct labour hour: } & \$ 4 & \\\hline \text { Actual labour hours used: } & 14,000 & \\\hline \text { Actual variable manufacturing overhead costs: } & \$ 58,290 & \\\hline\end{array}$$
-The labour efficiency variance is?

• A)$6,375 F.
• B)$6,600 U.
• C)$6,600 F.
• D)$6,375 U.

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Definitions:

Returns to Scale

The rate at which output increases as inputs are increased proportionally in the production process.

Scale of Production

The level at which a production process is operating, ranging from small to large scale based on output volume and capacity.

Economies of Scale

Cost advantages that enterprises obtain due to their scale of operation, with cost per unit of output decreasing with increasing scale.

Average Total Cost

The total cost of production divided by the total quantity produced, indicating the per unit cost of production.