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

question 83

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: $$\begin{array} { | l | l | l | } \hline \text { Labour rate variance: } & \$ 7,000 & \mathrm {~F} \\\hline \text { Labour efficiency variance: } & \$ 12,000 & \mathrm {~F} \\\hline \text { Variable overhead efficiency variance: } & \$ 4,000 & \mathrm {~F} \\\hline \text { Number of units produced: } & 10,000 & \\\hline \text { Standard labour rate per direct labour hour: } & \$ 12 & \\\hline \text { Standard variable overhead rate per direct labour hour: } & \$ 4 & \\\hline \text { Actual labour hours used: } & 14,000 & \\\hline \text { Actual variable manufacturing overhead costs: } & \$ 58,290 & \\\hline\end{array}$$
-Which of the following statements is not true about the use of a standard cost system

• A)Standards can be used by individuals to judge their own performance.
• B)A favourable variance will always be good thing for a business.
• C)The use of standard costs can greatly simplify bookkeeping.
• D)As long as costs do not fall significantly outside of standards managers can usually focus on other issues.

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Definitions:

Cloud Point

The temperature at which some of the fractions in a diesel fuel begin to wax (solidify) and the fuel takes on an opaque appearance. This can cause problems in the fuel subsystem by plugging filters, resulting in engine shutdown. Most diesel fuel conditioners contain cloud point and pour point depressants.

Wax Crystals

Solid crystalline substances formed in some oils and fats that can cause blockages in fuel systems or cloud the appearance of liquids at lower temperatures.

Plug Filters

Devices used to remove particulate contaminants from fluids or gas streams, often installed in-line with other machinery or systems.