1.

Hurren Corporation makes a product with the following standard costs:

Inputs	Standard Quantity or Hours	Standard Price or Rate	Standard Cost Per Unit
Direct materials	5.6 grams	$4.00 per gram	$22.40
Direct labor	0.8 hours	$11.00 per hour	$8.80
Variable overhead	0.8 hours	$4.00 per hour	$3.20

The company reported the following results concerning this product in June.

Originally budgeted output	5,400	units
Actual output	5,300	units
Raw materials used in production	28,500	grams
Actual direct labor-hours	3,600	hours
Purchases of raw materials	33,000	grams
Actual price of raw materials purchased	$4.10	per gram
Actual direct labor rate	$11.90	per hour
Actual variable overhead rate	$3.70	per hour

The company applies variable overhead on the basis of direct labor-hours. The direct materials price variance is computed when the materials are purchased.

The variable overhead efficiency variance for June is:

$2,368 U

$2,560 F

$2,368 F

$2,560 U

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2. The following labor standards have been established for a particular product:

Standard labor hours per unit of output 4.0 hours Standard labor rate $12.30 per hours The following data pertain to operations concerning the product for the last month: Actual hours worked 7,100 hours Actual total labor cost $89,105 Actual output 1,500 units

What is the labor efficiency variance for the month?

$15,305 F

$15,305 U

$13,805 U

$13,530 U

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3.

The Varone Company makes a single product called a Hom. The company has the capacity to produce 40,000 Homs per year. Per unit costs to produce and sell one Hom at that activity level are:

Direct materials	$30
Direct labor	$20
Variable manufacturing overhead	$15
Fixed manufacturing overhead	$17
Variable selling expense	$12
Fixed selling expense	$4

The regular selling price for one Hom is $100. A special order has been received at Varone from the Fairview Company to purchase 8,700 Homs next year at 15% off the regular selling price. If this special order were accepted, the variable selling expense would be reduced by 25%. However, Varone would have to purchase a specialized machine to engrave the Fairview name on each Hom in the special order. This machine would cost $13,000 and it would have no use after the special order was filled. The total fixed costs, both manufacturing and selling, are constant within the relevant range of 30,000 to 40,000 Homs per year. Assume direct labor is a variable cost.

If Varone can expect to sell 31,000 Homs next year through regular channels and the special order is accepted at 15% off the regular selling price, the effect on net operating income next year due to accepting this order would be a:

$53,000 increase

$87,000 increase

$82,700 increase

$22,000 decrease