A Company Provided the Following Direct Materials Cost Information

question 30

Multiple Choice

A company provided the following direct materials cost information. Compute the cost variance.

• A) $2,500 Favorable.
• B) $78,250 Favorable.
• C) $78,250 Unfavorable.
• D) $80,750 Favorable.
• E) $80,750 UnfavorablE.Actual cost $888,250 - Standard cost $810,000 = $78,250 U

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Definitions:

Raw Materials

Materials and substances used in the initial stages of production, instrumental in manufacturing goods.

Indirect Materials

Materials used in the production process that cannot be directly linked to specific products or jobs, such as lubricants and cleaning supplies for machinery.

Production

The act of developing, expanding, producing, or enhancing products and services.

Predetermined Overhead Rate

An estimated rate used to allocate manufacturing overhead costs to individual products or job orders based on a certain activity base.