Please explain Part B solutions

Part A. Circle the letter that corresponds to the one, best answer.

1. An example of a product cost is

a. Direct labor costs incurred by a manufacturer.

b. Rent incurred by a doctors office.

c. Advertising cost.

d. Sales salaries incurred by a retailer.

2. For a manufacturer, the amount of depreciation on factory equipment is a

a. Product cost.

b. Direct labor cost.

c. Direct material cost.

d. Period cost.

3. Total inventory on the balance sheet of a manufacturer consists of

a. Raw materials inventory.

b. Work in process inventory.

c. Finished goods inventory.

d. All of the above (raw materials, work in process, and finished goods).

4. An unfavorable price variance and an unfavorable quantity variance will produce a(n)

a. Applied factory overhead cost.

b. Favorable total variance.

c. Unfavorable total variance.

d. Standard product cost.

5. Sales revenue minus cost of goods sold equals

a. Net profit.

b. Gross profit.

c. Cost of goods manufactured.

d. Total assets.

Part B. Complete the problem on the reverse side of this page.

Part B. Redlands, Inc. planned to make 10 units of a finished product. The standard and actual costs for direct materials and direct labor per unit of output are as follows:

Item	Standard	Actual
Direct material	4 lbs.	5 lbs.
Cost of direct material	$1 per lb.	$2 per lb.
Direct labor	2 hours	3 hours
Cost of direct labor	$6 per direct labor hour	$5 per direct labor hour

Redlands actually made 11 units of the finished product, not the 10 units it expected to make.

Use the following template to determine the following variances for both direct materials and direct labor.

Actual Quantity * Actual Price		Actual Quantity * Standard Price			Standard Quantity * Standard Price
Price variance:			Quantity variance:
Total variance:

Required: Fill in the correct amounts and indicate a favorable variance by the letter F and an unfavorable variance by a U:

1. The direct materials quantity variance is: $________.

2. The direct materials price variance is: $________.

3. The total direct materials variance is: $________.

4. The direct labor quantity variance is: $________.

The direct labor price variance is: $__