A Company Has Established 5 Pounds of Material J at $2

question 190

Multiple Choice

A company has established 5 pounds of Material J at $2 per pound as the standard for the material in its Product Z.The company has just produced 1,000 units of this product,using 5,200 pounds of Material J that cost $9,880.The direct materials quantity variance is:

• A)$400 unfavorable.
• B)$120 favorable.
• C)$400 favorable.
• D)$520 favorable.
• E)$520 unfavorable.

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Definitions:

Contribution Margin

The amount of revenue remaining after deducting variable costs, used to cover fixed costs and generate profit.

Variable Cost

Expenses that vary directly with the level of production output or sales volume, such as raw materials and direct labor costs.

Sales Revenue

Income earned from the sale of goods or services, representing the primary source of income for businesses involved in retail or wholesale trade.

Safety Margin

The difference between the actual performance of an entity and its break-even point.