Use the Following Information to Answer Questions
EKPN Company

question 71

Multiple Choice

Use the following information to answer questions
EKPN Company prepared the following data in its static budget based on 150,000 machine hours:
$$\begin{array} { l l } \text { Direct Materials } & \$ 4 5 0 , 0 0 0 \\\text { Direct Labour } & 2 2 5 , 0 0 0 \\\text { Variable Overhead } & 1,125,000 \\\text { Fixed Overhead } & \mathbf { 2 } , 100,000\end{array}$$ $$\begin{array} { l l } \text { Actual Results: } & \\\text { Machine Hours } & 160,000 \text { hours } \\\text { Direct Materials } & \$ 475,000 \\\text { Direct Labaur } & 2 4 5 , 000 \\\text { Variable Overhead } & 1,150,000 \\\text { Fixed Overhead } & \mathbf { 2 } , 110,000\end{array}$$
-What was the difference between the actual and budgeted direct material costs at the actual level of activity?

• A)$25,000 unfavourable
• B)$25,000 favourable
• C)$5,000 unfavourable
• D)$5,000 favourable

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Definitions:

Sample

A subset of a population selected for measurement, observation, or questioning, to provide statistical information about the population.

Nondirectional Hypothesis

A hypothesis that predicts the existence of a relationship, not its direction.

Return on Equity

A measure of financial performance calculated by dividing net income by shareholders' equity, indicating how effectively management uses equity investments.

Total Capitalization

The total value of a company’s outstanding equity and debt.