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:

Hamburgers

A popular food item consisting of a cooked patty of ground meat, usually beef, placed inside a sliced bread roll or bun.

Deadweight Loss

A loss in economic efficiency that occurs when the equilibrium outcome is not achievable or is not achieved.

Elastic

A characteristic of a good or service that indicates its sensitivity to changes in price, with relatively large changes in quantity demanded or supplied in response to price changes.

Inelastic

Inelastic describes a situation where the demand or supply for a good or service is not significantly changed by variations in price.