Galla Corporation Makes a Product with the Following Standard Costs

question 16

Multiple Choice

Galla Corporation makes a product with the following standard costs:


The company budgeted for production of 2,400 units in June, but actual production was 2,500 units. The company used 19,850 pounds of direct material and 980 direct labor-hours to produce this output. The company purchased 21,700 pounds of the direct material at $6.70 per pound. The actual direct labor rate was $19.20 per hour and the actual variable overhead rate was $1.80 per hour.

The company applies variable overhead on the basis of direct labor-hours. The direct materials purchases variance is computed when the materials are purchased.

-The variable overhead efficiency variance for June is:

• A)$36 U
• B)$36 F
• C)$40 U
• D)$40 F

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Definitions:

Capital Item

Long-term assets or investments used in the production of goods and services, such as buildings, machinery, and equipment.

Machinery

Machines collectively or a system of devices that operate together to perform a particular task.

Urban Land

Urban land is designated areas in cities and towns used for residential, commercial, industrial, or recreational purposes.

Economic Rent

Represents the payment to an owner or factor of production in excess of the costs needed to bring that factor into production. In simpler terms, it's the extra income earned because of an owner's unique position or resource.