Mason Ltd Uses a Standard Costing System

question 46

Multiple Choice

Mason Ltd uses a standard costing system. Overhead costs are allocated based on direct labor hours. The standard variable overhead and fixed overhead rates are $1 and $5 per direct labor hour, respectively. Data relevant for the current period include: The variable overhead spending variance is

• A) $930 Favorable
• B) $2,070 Unfavorable
• C) $33,000 Unfavorable
• D) $33,000 Unfavorable.

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Definitions:

Direct Labor

This refers to the wages paid to employees who are directly involved in the production of goods or services.

Automation

The use of technology to perform tasks without human intervention, often leading to increased efficiency and accuracy.

Variable Costs

Expenses that change in proportion to the activity of a business, such as costs for raw materials or production.

Fixed Costs

Costs that remain constant in total regardless of changes in the volume of activity within certain limits of capacity.