A Company Uses the Following Standard Costs to Produce a Single

question 208

Multiple Choice

A company uses the following standard costs to produce a single unit of output. $$\begin{array} { l l l } \text { Direct materials } & 6 \text { pounds at } \$ 0.90 \text { per pound } & = \$ 5.40 \\\text { Direct labor } & 0.5 \text { hour at } \$ 12.00 \text { per hour } & = \$ 6.00 \\\text { Manufacturing overhead } & 0.5 \text { hour at } \$ 4.80 \text { per hour } & = \$ 2.40\end{array}$$ During the latest month, the company purchased and used 58,000 pounds of direct materials at a price of $1.00 per pound to produce 10,000 units of output. Direct labor costs for the month totaled $56,350 based on 4,900 direct labor hours worked. Variable manufacturing overhead costs incurred totaled $15,000 and fixed manufacturing overhead incurred was $10,400. Based on this information, the total direct materials cost variance for the month was:

• A) $4,000 unfavorable
• B) $4,000 favorable
• C) $5,800 favorable
• D) $5,800 unfavorable
• E) $1,800 favorable

---

Definitions:

Good Title

A legal term indicating that a property title is valid and free of any liens or other encumbrances that might hinder its sale or use.

Fair Market Value

The price at which property would sell on the open market between a willing buyer and a willing seller, each having reasonable knowledge of the relevant facts.

Recourse

Recourse refers to the legal right to demand compensation or payment from an individual or entity responsible for a loss, debt, or other obligation.

Inventory

The total amount of goods and materials held by a business for the purpose of resale or production.