Marv Company's Direct Labor Costs for Manufacturing Its Only Product

question 147

Multiple Choice

Marv Company's direct labor costs for manufacturing its only product were as follows for October: $\begin{array}{lrr}\text { Standard direct labor hours (DLHs) per unit of product } & 2.0 \\\text { Budgeted finished units for the period } & 6,000 \\\text { Actual number of finished units produced } & 5,000 \\\text { Standard wage rate per direct labor hour (SP) } & \$ 20.00 \\\text { Direct labor costs incurred } & \$ 207,000 \\\text { Actual wage rate per direct labor hour (AP) } & \$ 18.00\end{array}$ The total direct labor variance for October, rounded to the nearest dollar, was:

• A) $7,000 unfavorable.
• B) $9,000 favorable.
• C) $9,000 unfavorable.
• D) $32,000 favorable.
• E) $54,000 unfavorable.

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Definitions:

Variable Costs

Expenditures that shift in direct relation with the amount of output or sales, including raw materials and direct labor costs.

Cost-volume-profit Analysis

An analytical tool used to determine how changes in cost, volume, and profit affect a company's profit.

Sales Mix

The proportion of different products or services that a company sells, intended to maximize profitability.

Relevant Range

The relevant range refers to the range of activity or volume over which the assumptions about variable and fixed cost behaviors hold true for management decision-making purposes.