The Standard Materials Cost to Produce 1 Unit of Product

question 155

Multiple Choice

The standard materials cost to produce 1 unit of Product M is 6 pounds of material at a standard price of $50 per pound. In manufacturing 8,000 units, 47,000 pounds of material were used at a cost of $51 per pound. What is the total direct materials cost variance?

• A) $48,000 unfavorable.
• B) $51,000 favorable.
• C) $51,000 unfavorable.
• D) $3,000 favorable.
• E) $3,000 unfavorable.

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Definitions:

Marginal Cost

The added expense from the production of one additional unit of a product or service.

Economies of Scale

The cost advantages that enterprises obtain due to their scale of operation, with cost per unit of output generally decreasing with increasing scale as fixed costs are spread out over more units.

Profitable

A financial status where the income or revenue generated exceeds the costs or expenses, resulting in a financial gain.

Natural Monopoly

A market where a single supplier can produce output at a lower cost than multiple competitors, often due to economies of scale.