Answer Corporation Uses Standard Cost System $\text {Standard Costs}$ $\begin{array}{ll}\text { Direct materials } & 2,500 \text { kilograms } @ \$ 8 \\\text { Direct labor } & 7,500 \text { hours } @ \$ 12\end{array}$

question 96

Multiple Choice

Answer Corporation uses standard cost system.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: $\text {Standard Costs}$
$\begin{array}{ll}\text { Direct materials } & 2,500 \text { kilograms } @ \$ 8 \\\text { Direct labor } & 7,500 \text { hours } @ \$ 12\end{array}$

$\text { Actual Costs }$
$\begin{array}{ll}\text { Direct materials } & 2,600 \text { kilograms } @ \$ 8.75 \\\text { Direct labor } & 7,400 \text { hours } @ \$ 11.40\end{array}$
? 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 direct labor time variance is:

• A) $1,200 favorable.
• B) $1,140 unfavorable.
• C) $1,200 unfavorable.
• D) $1,140 favorable.

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