Standard Gears Produces Lawn Mower Gears How Much Is the Direct Material Price Variance?
A)$465 Favorable

question 91

Multiple Choice

Standard Gears produces lawn mower gears.It uses units as the cost driver for overhead.The following information was provided concerning its standard cost system: $\begin{array}{|l|l|l|l|}\hline{\text { Actual Data }} &&{\text { Budgeted and Stand ard Data }} \\\hline \text { Produced } & 12,400 \text { units } & \text { Budgeted units } & 12,500 \text { units } \\\hline \text { Materials purchased } & \begin{array}{c}4,650 \mathrm{lbs} . \text { for a total cost of } \\\$ 32,550\end{array} & \text { Budgeted materials } & 0.40 \mathrm{lb} . @ \$ 7.10 \text { per } \mathrm{lb} . \\\hline \text { Materials used } & 4,700 \mathrm{lbs} . &\text { Budgeted labor }& \begin{array}{c}36 \text { minutes } @ \$ 11.00 \text { per } \\\text { hour }\end{array} \\\hline \text { Labor worked } & 7,460 \text { hrs. costing } \$ 79,822 & \begin{array}{l}\text { Budgeted variable } \\\text { overhead }\end{array} & \$ 35,625 \\\hline \text { Actual overhead } & \begin{array}{l}\text { Fixed: } \$ 84,800 \\\text { Variable } \$ 36,100\end{array} & \begin{array}{l}\text { Budgeted fixed } \\\text { overhead }\end{array} & \$ 85,500 \\\hline\end{array}$ How much is the direct material price variance?

• A)$465 favorable
• B)$1,846 favorable
• C)$470 favorable
• D)$2,201 favorable

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Definitions:

Straight-Line Depreciation

A method for apportioning the cost of a tangible asset over its viable life in steady yearly figures.

Operating Cash Inflow

Funds that are generated from a company's normal business operations, reflecting the cash inflows from selling goods and services.

Working Capital

The difference between a company's current assets and its current liabilities, indicating the liquid assets available for day-to-day operations.

Straight-Line Depreciation

A way of allocating an asset's expenditure smoothly over its effective life.