If a Company Has a Decision Involving Whether or Not

question 127

True/False

If a company has a decision involving whether or not to replace a machine, the cost of disposing of the old machine would be one of the relevant costs of the decision.

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Definitions:

Direct Labor Standards

The expected labor time and cost that should be incurred under normal conditions to produce a unit of output.

Labor Rate Variance

The difference between the actual cost of direct labor and the estimated cost of direct labor at standard rates for the production achieved.

Labor Efficiency Variance

The difference between the actual hours worked to produce goods and the standard hours expected, multiplied by the standard labor rate, indicating efficiency in labor use.

Material Price Variance

The variance between the real price paid for materials and their anticipated (standard) price.