Cole Laboratories Makes and Sells a Lawn Fertilizer Called Fastgro

question 115

Multiple Choice

Cole Laboratories makes and sells a lawn fertilizer called Fastgro. The company has developed standard costs for one bag of Fastgro as follows:
$\begin{array}{|l|r|r|}\hline & \text { Standard Quantity } & \text { Standard Cost per Bag } \\\hline \text { Direct Materials } & 20 \text { kilograms } & \$ 8.00 \\\hline \text { Direct Labour } & 0.1 \text { hours } & 1.10 \\\hline \text { Variable Manufacturing Overhead } & 0.1 \text { hours } & .40\\\hline \end{array}$
The company had no beginning inventories of any kind on January 1. Variable manufacturing overhead is applied to production on the basis of direct labour hours. The results of the company's operations during January are as follows:
$\begin{array}{|l|r|}\hline \text { Production of Fastgro: } & 4,000 \text { bags } \\\hline \text { Direct Materials Purchased } & 85,000 \text { kilograms at a cost of } \$ 32,300 \\\hline \text { Direct Labour Used } & 390 \text { hours at a cost of } \$ 4,875 \\\hline \text { Variable Manufacturing Overhead Incurred } & \$ 1,475 \\\hline \text { Inventory of Direct Materials on January } 31 & 3,000 \text { kilograms } \\\hline\end{array}$
-What was the total variance for variable overhead for January?

• A) $40 favourable.
• B) $85 favourable.
• C) $100 unfavourable.
• D) $125 favourable.

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Definitions:

Budgeted Production

The planned volume of goods a company aims to manufacture over a certain period, often used for planning and control purposes.

Raw Materials Inventory

The total cost of all the raw materials that are used in production but have not yet been processed into finished goods.

Raw Materials Purchases

The total cost a company incurs for acquiring the raw materials needed in the production process.

Budgeted Balance Sheet

A projected financial statement showing the expected financial position of a company at a future date, taking into account its assets, liabilities, and equity.