Question
Diana Industries, Inc. (DII), developed standard costs for direct material and direct labor. In 2010, DII estimated the following standard costs for one of their
Diana Industries, Inc. (DII), developed standard costs for direct material and direct labor. In 2010, DII estimated the following standard costs for one of their major products, the 10-gallon plastic container.
Budgeted quantity Budgeted price
Direct materials 0.10 pounds $30 per pound
Direct labor 0.05 hours $15 per hour
During June, DII produced and sold 10,000 containers using 980 pounds of direct materials at an average cost per pound of $32 and 500 direct manufacturing labor-hours at an average wage of $15.25 per hour.
1) June's direct material efficiency variance is:
A) $600 favorable
B) $1,360 favorable
C) $1,860 unfavorable
D) $15,000 favorable
2) A favorable price variance for direct materials indicates that:
A) a lower price than planned was paid for materials
B) a higher price than planned was paid for materials
C) less material was used during production than planned for actual output
D) more material was used during production than planned for actual output
3) A favorable efficiency variance for direct manufacturing labor indicates that:
A) a lower wage rate than planned was paid for direct labor
B) a higher wage rate than planned was paid for direct labor
C) less direct manufacturing labor-hours were used during production than planned for actual output
D) more direct manufacturing labor-hours were used during production than planned for actual output
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