The Standard Costs and Actual Costs for Direct Materials, Direct $\text { Standard Costs }$

question 102

Multiple Choice

The standard costs and actual costs for direct materials, direct labor, and factory overhead for the manufacture of 2,500 units of product are as follows: $\text { Standard Costs }$
$\begin{array}{ll}\text { Direct materials } & 2,500 \text { kilograms } @ \$ 8 \\\text { Direct labor } & 7,500 \text { hours } @ \$ 12\end{array}$

$\underline{\text {Actual Costs}}$
$\begin{array}{ll}\text { Direct materials } & 2,600 \text { kilograms } @ \$ 8.75 \\\text { Direct labor } & 7,400 \text { hours } @ \$ 11.40\end{array}$ Factory overhead (100% capacity - 10,000 hrs.) : Variable cost @ $2 per hour
Total variable cost, $18,000
Fixed cost @ $0.80 per hour
Total fixed cost, $8,000
The amount of the fixed factory overhead volume variance is:

• A) $2,000 favorable.
• B) $2,500 favorable.
• C) $2,500 unfavorable.
• D) $2,000 unfavorable.

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Definitions:

Expansion Path

Curve passing through points of tangency between a firm’s isocost lines and its isoquants.

Long Run

A period in which all factors of production and costs are variable, allowing all inputs to be adjusted.

Marginal Cost

The extra financial outlay needed for manufacturing another unit of a product or service.

Marginal Product

The boost in production one can expect by adding an extra unit of labor or capital, ceteris paribus.