Long,IncProduces Small Engines Long,IncEmploys a Standard Costing System

question 96

Multiple Choice

Long,Inc.produces small engines.For last year's operations,the following data were gathered: $\begin{array}{ll}\text { Units produced: } & 100,000 \\\text { Direct labour: } & 160,000 \text { hours }(\$ 12.00 \text { per } \\& \text { hour } \\\text { Actual variable overhead: } & \$ 1,300,000\end{array}$ Long,Inc.employs a standard costing system.During the year,a variable overhead rate of $8.00 per hour was used.The labour standard requires 1.5 hours per unit produced.What are the variable overhead spending and efficiency variances,respectively?

• A) $20,000 U and $80,000 U
• B) $20,000 U and $80,000 F
• C) $100,000 U and $20,000 U
• D) $100,000 U and $20,000 F

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Definitions:

Risk Premium

The extra return expected from an investment for taking on additional risk.

Security Market Line

A graphical representation of the expected return of an asset compared to its risk, as measured by beta.

Systematic Risk

The risk inherent to the entire market or an entire market segment, which cannot be eliminated through diversification.

Expected Return

The expected return is the anticipated profit or loss from an investment over a given period.