Answer the Following Questions Using the Information Below

question 62

Multiple Choice

Answer the following questions using the information below:
Diana Industries, Inc. (DII) , developed standard costs for direct material and direct labor. In 2010, DII estimated the following standard costs for one of their major products, the 10-gallon plastic container.
During June, DII produced and sold 10,000 containers using 980 pounds of direct materials at an average cost per pound of $32 and 500 direct manufacturing labor-hours at an average wage of $15.25 per hour.
-June's direct material price variance is:

• A)$1,960 unfavorable
• B)$600 favorable
• C)$1,360 favorable
• D)None of these answers are correct.

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Definitions:

Operating Leverage

A measure of how revenue growth translates into growth in operating income, showing the proportion of fixed to variable costs.

Fixed Costs

Overheads, such as rent, insurance fees, and payroll, that stay the same, independent of the amount of goods produced or sold.

Sensitivity Analysis

An analysis method to evaluate how changes in the values of an independent variable influence a dependent variable, based on a set of given assumptions.

NPV

Stands for Net Present Value, a method used in capital budgeting to evaluate the profitability of an investment or project.