The Standards for Direct Materials in Making a Certain Product

question 27

Multiple Choice

The standards for direct materials in making a certain product are 20 pounds at $0.75 per pound. During the past period, 56,000 units of product were made and the materials quantity variance was $30,000 U. The number of pounds of direct material used during the period amounted to:

• A)1,080,000
• B)1,160,000
• C)1,200,000
• D)784,000

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Definitions:

Shortage

A situation in which the demand for a good or service exceeds its supply in a market.

Surplus

is an economic situation in which the quantity of a good supplied exceeds the quantity demanded at the current price, often leading to a decrease in prices.

Supply Determined

Refers to market situations where the quantity of products available in the market is primarily dictated by the supply side factors such as production capacity and inventory levels rather than by consumer demand.

Price Rationing

The process of distributing goods and services among consumers by setting a price level that balances demand with supply.