In a Company's Standard Costing System Direct Labor-Hours Are Used

question 135

Multiple Choice

In a company's standard costing system direct labor-hours are used as the base for applying variable manufacturing overhead costs. The standard direct labor rate is twice the variable overhead rate. Last period the labor efficiency variance was unfavorable. From this information one can conclude that last period the variable overhead efficiency variance was:

• A)unfavorable and half the labor efficiency variance.
• B)favorable and half the labor efficiency variance.
• C)unfavorable and twice the labor efficiency variance.
• D)favorable and twice the labor efficiency variance.

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Definitions:

Machine-Hours

refers to the total time that production equipment is operated during a specific period, used as a basis for allocating manufacturing overhead.

Assembly Department

A segment within a manufacturing facility where parts are put together to form a finished product.

Predetermined Overhead Rate

is an estimated rate used to allocate manufacturing overhead costs to individual products or job orders based on a specific activity base.

Finishing Department

The final stage in the manufacturing process where products are completed, packaged, and prepared for delivery.