Min Company Has Developed the Following Standards for One of Its

question 44

Multiple Choice

Min Company has developed the following standards for one of its products. $\begin{array}{ll}\text { Direct materials: } & 15 \mathrm{~kg} \times \$ 17.50 \text { per kilogram } \\\text { Direct labour: } & 4 \text { hours } \times \$ 24 \text { per hour } \\\text { Variable manufacturing overhead: } & 4 \text { hours } \times \$ 14 \text { per hour }\end{array}$ The following activity occurred during the month of November: $$\begin{array} { l l } \text { Materials purchased: } & 20,000 \mathrm {~kg} \text { costing } \$ 340,000 \\\text { Materials used: } & 7,200 \mathrm {~kg} \\\text { Units produced: } & 500 \text { units } \\\text { Direct labour: } & 2,300 \text { hours at } \$ 23.60 \text { per hour }\end{array}$$ The company records materials price variances at the time of purchase.What is the direct materials price variance?

• A) $10,000 favourable
• B) $10,000 unfavourable
• C) $50,000 favourable
• D) $50,000 unfavourable

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Definitions:

Percent of Sales Method

A forecasting technique used in finance to predict future variables such as assets, liabilities, and expenses, based on projected sales figures.

Uncollectible

Refers to accounts receivable that a company has determined cannot be collected from customers.

Aging of Accounts Receivable Method

An accounting technique used to estimate the amount of uncollectable accounts receivable based on their age.

Allowance Method

An accounting technique used to estimate and account for doubtful debts, reflecting potential future losses on receivables.