Derf Corporation Uses a Standard Cost System in Which It

question 64

Multiple Choice

Derf Corporation uses a standard cost system in which it applies manufacturing overhead on the basis of standard direct labor-hours. Two direct labor-hours are required for each unit produced. The denominator activity was set at 9,000 units. Manufacturing overhead was budgeted at $135,000 for the period; 20 percent of this cost was fixed. The 17,200 hours worked during the period resulted in production of 8,500 units. Variable manufacturing overhead cost incurred was $108,500 and fixed manufacturing overhead cost was $28,000.
-The variable overhead efficiency variance for the period was:

• A)$5,300 Unfavorable
• B)$1,200 Unfavorable
• C)$1,500 Unfavorable
• D)$6,500 Unfavorable

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Definitions:

Objective Nature

The characteristic of being based on factual and observable phenomena, not influenced by emotions or personal biases.

Piece Rates

A compensation method where employees are paid based on the amount of work they complete, such as the number of items produced or tasks finished.

Commissions

A form of payment to an employee based on the sales they generate, usually a percentage of the sales amount.

External Control

Mechanisms or practices imposed from outside an organization to ensure it meets legal, ethical, or standard compliance, such as regulatory measures.