The Thompson Company Uses Standard Costing and Has Established the Following

question 30

Multiple Choice

The Thompson Company uses standard costing and has established the following direct material and direct labor standards for each unit of Lept.

Direct materials: 2 gallons at $4 per gallon
Direct labor: 0.5 hours at $8 per hour

During September, the company made 6,000 Lepts and incurred the following costs:

Direct materials purchased: 13,400 gallons at $4.10 per gallon
Direct materials used: 12,600 gallons
Direct labor used: 2,800 hours at $7.65 per hour

-The materials quantity variance for September was:

• A)$2,460 unfavorable
• B)$5,600 unfavorable
• C)$2,400 unfavorable
• D)$5,740 unfavorable

---

Definitions:

Holdback Money

Funds retained by a party in a contract to ensure obligations are met before making full payment.

Privity of Contract

The principle that a contract cannot confer rights or impose obligations arising under it on any person or agent except the parties to it.

Doctrine of Privity

A legal principle stating that contracts are binding only upon the parties signing them, and no third-party can enforce or be obligated by the contract.

Progress Payments

Payments made through the course of a project or contract based on the completion of specified stages of work.