Carlton Corporation Carlton Corporation Produces and Sells Faux-Leather Handbags. in the Current

question 26

Multiple Choice

Carlton Corporation
Carlton Corporation produces and sells faux-leather handbags. In the current year, the company budgeted for the production and sale of 1000 handbags; however, 900 handbags were actually produced and sold. Each bag has a standard requiring 2 metres of material at a cost of $4.00 per metre and 1 hour of assembly time at a cost of $9.50 per hour. Actual costs for the production of 900 bags were $7215 for materials (1850 metres purchased and used @ $3.90 per metre) and $10 125 for labour (1125 hours @ $9.00 per hour) .
-Carlton's direct labour efficiency variance is:

• A) $ 562.50 F
• B) $2 137.50 U
• C) $1 187.50 U
• D) $2 025.00 F

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Definitions:

Economic Profit

The difference between total revenue and total costs, including both explicit and implicit costs, representing the financial gain in excess of the opportunity costs of resources used.

X-Inefficiency

The difference between efficient behavior of enterprises assumed or implied by economic theory and their observed behavior in practice, often due to a lack of competitive pressure.

Pure Competition

A market structure characterized by many small firms producing identical products, where no single firm has significant control over the market price.

Monopolistic Competition

A market structure characterized by many producers selling products that are similar but not identical, allowing for competition based on quality, price, and brand.