Carlton Corporation Carlton Corporation Produces and Sells Faux-Leather Handbags

question 66

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 labor rate variance is:

• A) $562.50 F.
• B) $562.50 U.
• C) $450.00 F.
• D) $450.00 U.

---

Definitions:

Journal Entry

A record in accountancy that captures the financial transactions of a company, showing the accounts affected and in which direction (debit or credit).

Convertible Securities

Financial instruments, such as bonds or preferred shares, that can be converted into a company’s common stock.

Diluted EPS

Earnings per share calculated by including all convertible securities, warrants, options, and other financial instruments that could potentially dilute the earnings per share if exercised.

Convertible Preferred Stock

A type of preferred stock that holders can convert into a specified number of common shares, usually after a predetermined date.