cole laboratories makes and sells a lawn fertilizer called fastgro. the company
ID: 2363742 • Letter: C
Question
cole laboratories makes and sells a lawn fertilizer called fastgro. the company has developed standard costs for one bag offastgro as follows: standard standard cost quantity per bag direct material 20 pounds $8.00 direc labor 0.1 hours $1.10variable overhead 0.1 hours $0.40 the company had no beginning inventories of any kind on jan. 1. variable overhead isapplied to production on the basis of standard direct labor-hours. during january, the following activity was recorded by thecompany: bull production of fastgro: 4,000 bags bull direct materials used: 85,000 pounds at a cost of $32,300 bull directlabor worked: 390 hours at a cost of $4,875 bull variable overhead incurred: $1,475 the total variance both rate andefficieny for varialbe overhead for january 1: a. $85 f b. $40 F c. 100 u d. 125 fExplanation / Answer
the answer is
c. 100 u
reason
• Production of Fastgro: 4,000 bags
• Direct materials purchased: 85,000 pounds at a cost of $32,300
• Direct-labor worked: 390 hours at a cost of $4,875
• Variable overhead incurred: $1,475
• Inventory of direct materials on January 31: 3,000 pounds
1. The labor efficiency variance for January is
answer :
A. $100 u.
SR = $1.10 0.1 = $11.00
SH = 4,000 x 0.1 = 400
Direct labor efficiency variance = SR (AH - SH) = $11.00 (300 - 400) = $100 u
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