Jackson Industries Uses a Standard Cost System in Which Direct

question 46

Multiple Choice

Jackson Industries uses a standard cost system in which direct materials inventory is carried at standard cost. Jackson has established the following standards for one unit of product. During May, Jackson purchased 125,000 pounds of direct material at a total cost of $475,000. The total factory wages for May were $364,000, 90 percent of which were for direct labor. Jackson manufactured 22,000 units of product during May using 108,000 pounds of direct material and 28,000 direct labor-hours. The labor rate variance for May is:

• A)$8,400 Favorable
• B)$7,200 Unfavorable
• C)$8,400 Unfavorable
• D)$6,000 Favorable

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Definitions:

Volume Variance

A measure of the difference between the budgeted and actual volume of production, affecting costs or profitability.

Manufacturing Overhead

All manufacturing costs that are not direct labor or direct materials, such as utilities, depreciation, and maintenance of equipment.

Direct Labor-Hours

The total hours worked by employees directly involved in the manufacturing process.

Standard Cost System

An accounting method that uses cost estimates to predict the cost of producing or acquiring goods.