A Company Provided the Following Direct Materials Cost Information

question 153

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.

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Definitions:

Direct Materials

Raw materials that can be directly traced to the production of a specific product or service.

Ending Inventory

The financial valuation of items for sale at the conclusion of a financial period, figured by starting with the beginning inventory, adding purchases, and then deducting the cost of goods sold.

Purchased

Refers to goods or services obtained by paying money or its equivalent.

Master Budget

A comprehensive financial planning document that includes all of an organization's budgets, combining sales, production, and financial budgets to project overall financial activities.