The Albright Company Uses Standard Costing and Has Established the Following

question 163

Multiple Choice

The Albright Company uses standard costing and has established the following standards $f$ its single product:
$\begin{array}{|l|r|}\hline \text { Direct Materials } & 2 \text { litres at \$3 per litre } \\\hline \text { Direct Labour } & 0.5 \text { hours at \$8 per hour } \\\hline \text { Variable Manufacturing Overhead } & 0.5 \text { hours at \$2 per hour } \\\hline\end{array}$
During November, the company made 4,000 units and incurred the following costs:
$\begin{array}{|l|r|}\hline \text { Direct Materials Purchased } & 8,100 \text { litres at } \$ 3.10 \text { per litre } \\\hline \text { Direct Materials Used } & 7,600 \text { litres } \\\hline \text { Direct Labour Used } & 2,200 \text { hours at } \$ 8.25 \text { per hour } \\\hline \text { Actual Variable Manufacturing Overhead } & \$ 4,175 \\\hline\end{array}$
The company applies variable manufacturing overhead to products on the basis of direct labour hours.
-What was the total variable overhead variance for November?

• A) $175 unfavourable.
• B) $225 favourable.
• C) $225 unfavourable.
• D) $400 unfavourable.

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Definitions:

Statement of Comprehensive Income

A financial statement that includes all changes in equity during a period except those resulting from investments by owners and distributions to owners, encompassing both net income and other comprehensive income items.

Average Inventory

The average stock of goods held over a certain period, calculated to understand inventory levels better.

Cash Coverage Ratio

A metric that measures a company's ability to pay its interest obligations with its cash before deducting interest and taxes.