Bread Company has developed the following standards for one of its 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 efficiency variance is

a. $8,000 favorable.
b. $8,000 unfavorable.
c. $20,000 unfavorable.
d. $20,000 favorable.



(24,000 ´ $8) – (10,000 ´ 2.5 ´ $8) = $8,000 favorable

   35.   As a general rule, an investigation of a variance should be undertaken only if the

a. anticipated benefits are greater than zero.
b. anticipated benefits are greater than the expected costs.
c. variance is negative.
d. variance is positive.

ANS:  B                   

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