A Company Uses the Following Standard Costs to Produce a Single

question 45

Multiple Choice

A company uses the following standard costs to produce a single unit of output. During the latest month, the company purchased and used 58,000 pounds of direct materials at a price of $1.00 per pound to produce 10,000 units of output. Direct labor costs for the month totaled $56,350 based on 4,900 direct labor hours worked. Variable manufacturing overhead costs incurred totaled $15,000 and fixed manufacturing overhead incurred was $10,400. Based on this information, the direct materials price variance for the month was:

• A) $6,000 unfavorable
• B) $1,800 favorable
• C) $1,000 favorable
• D) $5,800 unfavorable
• E) $1,800 unfavorable

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Definitions:

Income Statement

A financial report that shows a company's revenues, expenses, and net income over a specific period.

Unrealized Loss

A reduction in value experienced by retaining an asset whose price has fallen, but has not been liquidated yet.

Net Income

The total earnings of a company after subtracting all expenses and taxes from total revenue.

Stockholders' Equity

The residual interest in the assets of the corporation after deducting its liabilities, representing ownership interest.