Faas Marine Stores Company Manufactures Decorative Fittings for Luxury Yachts

question 46

Multiple Choice

Faas Marine Stores Company manufactures decorative fittings for luxury yachts which require highly skilled labor, and special metallic materials. Faas uses standard costs to prepare its flexible budget. For the first quarter of 2011, direct material and direct labor standards for one of their popular products were as follows:
$$\begin{array} { l l } \text { Materials: } & 1.5 \text { pounds per unit; } \$ 4.00 \text { per pound } \\\text { Labor: } & 2.0 \text { hours per unit; } \$ 18.00 \text { per hour }\end{array}$$
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During the first quarter, Faas produced 5,000 units of this product. At the end of the quarter, an examination of the labor cost records showed that the company used 11,000 hours of direct labor and actual direct labor costs were $184,800. The direct labor price variance was $13,200 F. Which of the following would be a logical explanation for this variance?

• A) The company used fewer labor hours than allowed by standards.
• B) The company paid a lower rate for labor than allowed by standards.
• C) The company used a lower quantity of materials than allowed by standards.
• D) The company paid a lower price for the materials than allowed by standards.

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Definitions:

Selective Attention

The ability to direct mental resources to relevant information in order to process that information further, while also ignoring irrelevant information.

Information Processing

A psychological theory that describes the process through which humans encode, store, and retrieve information.

Explicit Memory

The type of memory that involves conscious recollection of previous experiences and information.

Elaborative Rehearsal

A method of memory consolidation that involves associating new information with already known information.