Biscuit Company Has Developed the Following Standards for One of Its

question 82

Multiple Choice

Biscuit Company has developed the following standards for one of its products. Direct labor hours is the driver used to assign overhead costs to products. Direct materials: 10 pounds × $3 per pound
Direct labor: 2.5 hours × $8 per hour
Variable manufacturing overhead: 2.5 hours × $2 per hour
The following activity occurred during the month of June:
Materials purchased: 125,000 pounds at $2.60 per pound
Materials used: 110,000 pounds
Units produced: 10,000 units
Direct labor: 24,000 hours at $7.50 per hour
Actual variable manufacturing overhead: $51,000
The company records materials price variances at the time of purchase.
The direct labor rate variance is

• A) $12,000 favorable.
• B) $8,000 favorable.
• C) $12,000 unfavorable.
• D) $8,000 unfavorable.

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Definitions:

Consequential Damage

Losses that occur as a secondary result of a direct loss or damage.

Breach

The violation of a law, duty, or other form of agreement.

Insolvent

The condition in which an individual or organization is unable to meet financial obligations due to lack of funds.

UCC 2-702(2)

A provision within the Uniform Commercial Code that allows sellers of goods to withhold delivery if they discover the buyer to be insolvent, under certain conditions.