A Company Uses the Following Standard Costs to Produce a Single

question 171

Multiple Choice

A company uses the following standard costs to produce a single unit of output. $$\begin{array} { l l l } \text { Direct materials } & 6 \text { pounds at } \$ 0.90 \text { per pound } & = \$ 5.40 \\\text { Direct labor } & 0.5 \text { hour at } \$ 12.00 \text { per hour } & = \$ 6.00 \\\text { Manufactuning overhead } & 0.5 \text { hour at } \$ 4.80 \text { per hour } & = \$ 2.40\end{array}$$ During the latest month, the company purchased and used 58,000 pounds of direct materials at a price of $1.00 per pound to produce 10,000 units of output. Direct labor costs for the month totaled
$56,350 based on 4,900 direct labor hours worked. Variable manufacturing overhead costs incurred totaled $15,000 and fixed manufacturing overhead incurred was $10,400.
-Based on this information, the direct materials quantity variance for the month was:

• A) $5,800 favorable
• B) $5,800 unfavorable
• C) $1,000 favorable
• D) $1,800 favorable
• E) $1,800 unfavorable

---

Definitions:

Life Insurance Reserves

Funds that life insurance companies are required to set aside to ensure they can meet future obligations to policyholders.

Pension Reserves

Funds set aside by an organization to meet future pension liabilities for its employees.

Money Market Securities

Short-term financial instruments that are considered relatively safe and liquid, including treasury bills, certificates of deposit, and commercial paper.

Highly Marketable

Describes assets or products that are easily sold or traded in the market due to high demand or liquidity.