Quality Brand Products Uses Standard Costing to Manage Their Direct

question 104

Multiple Choice

Quality Brand Products uses standard costing to manage their direct costs and their overhead costs. Overhead costs are allocated based on direct labor hours. In the first quarter, Quality Brand had an unfavorable cost variance for their variable overhead costs. Which of the following scenarios would be a reasonable explanation for that variance?

• A)The actual number of direct labor hours was lower than the budgeted hours.
• B)The actual variable overhead costs were higher than the budgeted costs.
• C)The actual variable overhead costs were lower than the budgeted costs.
• D)The actual number of direct labor hours was higher than the budgeted hours.

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Definitions:

Finished Goods

Items that have finished being manufactured and are prepared to be offered to consumers.

Manufacturing Cost

The total expense involved in the production of goods, including labor, materials, and overhead costs.

Finished Goods Inventory

The portion of inventory that has completed the production process and is ready for sale.

Work-In-Process Inventory

The value of inventory that has started the production process but is not yet completed.