The Geurtz Company Uses Standard Costing

question 92

Multiple Choice

The Geurtz Company uses standard costing. The company makes and sells a single product called a Roff. The following data are for the month of August:

• Actual cost of direct material purchased and used: $65,560
• Material price variance: $5,960 unfavorable
• Total materials variance: $22,360 unfavorable
• Standard cost per pound of material: $4
• Standard cost per direct labor-hour: $5
• Actual direct labor-hours: 6,500 hours
• Labor efficiency variance: $3,500 favorable
• Standard number of direct labor-hours per unit of Roff: 2 hours
• Total labor variance: $400 unfavorable

-The total number of units of Roff produced during August was:

• A)10,800
• B)14,400
• C)3,600
• D)6,500

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Definitions:

Overhead Cost

Expenses related to the general operation of a business that cannot be directly traced to a specific product or service, such as utilities and rent.

Activity Cost Pools

Aggregations of all costs associated with specific activities used in activity-based costing to allocate costs more accurately.

Activity-Based Costing

A method of accounting that assigns costs to products or services based on the activities they require, providing more accurate product costing.

Equipment Depreciation

The process of allocating the cost of physical assets used in a business over their useful life, recognizing the wear and tear over time.