Cole Laboratories Makes and Sells a Lawn Fertilizer Called Fastgro

question 174

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 labour efficiency variance for January? Do not round intermediate calculations.

• A) $110 favourable.
• B) $130 unfavourable.
• C) $350 unfavourable.
• D) $475 favourable.

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