Carlton Corporation Carlton Corporation Produces and Sells Faux-Leather Handbags

question 97

Multiple Choice

Carlton Corporation Carlton Corporation produces and sells faux-leather handbags. In the current year, the company budgeted for the production and sale of 1,000 handbags; however, 900 handbags were actually produced and sold. Each bag has a standard requiring two yards of material at a cost of $4.00 per yard and 1 hour of assembly time at a cost of $9.50 per hour. Actual costs for the production of 900 bags were $7,215 for materials (1,850 yards purchased and used @ $3.90 per yard) and $10,125 for labor (1,125 hours @ $9.00 per hour) .
Refer to the Carlton Corporation information above. Carlton's direct materials usage variance is:

• A) $585 U.
• B) $600 U.
• C) $195
• D) $200 U.

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Definitions:

Direct Method

A cash flow statement preparation approach that lists major operating cash receipts and payments, providing a clearer view of a company's cash flow from operations.

Accrual Accounting

An accounting method that records revenues and expenses when they are incurred, regardless of when cash is exchanged.

Operating Cash Flows

Cash generated from a company's regular business operations.

IFRS

International Financial Reporting Standards, a set of accounting standards developed by the International Accounting Standards Board that is used internationally.