At the End of 20x1, ELM Corporation's Production Manager Estimated

question 48

Multiple Choice

At the end of 20x1, ELM Corporation's production manager estimated direct labor overtime hours at 200 for the first quarter of 20x2. At the end of the first quarter, actual overtime hours totaled 180. This difference is most likely to lead to

• A) Favorable variable overhead spending variance
• B) Unfavorable production volume variance
• C) Favorable labor efficiency variance
• D) Unfavorable labor efficiency variance

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Definitions:

Credit Policy

The guidelines a company follows to determine the amount and terms of credit to extend to customers.

Net Sales

The amount of sales generated by a company after the deduction of returns, allowances for damaged or missing goods, and discounts.

Accounts Receivable Turnover

A financial ratio that measures how efficiently a company collects its receivables or the speed of debt collection from customers.

Average Account Receivables

The average amount of money owed to a company by its customers for goods or services delivered on credit.