Milar Corporation Makes a Product with the Following Standard Costs

question 218

Multiple Choice

Milar Corporation makes a product with the following standard costs:
In January the company produced 2,000 units using 16,060 pounds of the direct material and 210 direct labor-hours. During the month, the company purchased 16,900 pounds of the direct material at a cost of $65,910. The actual direct labor cost was $4,473 and the actual variable overhead cost was $756.
The company applies variable overhead on the basis of direct labor-hours. The direct materials purchases variance is computed when the materials are purchased.
-The materials quantity variance for January is:

• A) $2,640 U
• B) $2,574 F
• C) $2,640 F
• D) $2,574 U

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Definitions:

Total Variable Cost

The sum of expenses that vary directly with the level of production output, excluding any fixed costs.

Marginal Cost

The additional cost incurred from producing one more unit of a product or service.

Decreasing Rate

A situation where the rate of growth or progression reduces over time.

Total Fixed Costs

The sum of all costs that do not change with the level of output, such as rent, salary, and insurance premiums.