Answered: Golden Marine Stores Company…

Principles of Cost Accounting

17th Edition

ISBN:9781305087408

Author:Edward J. Vanderbeck, Maria R. Mitchell

Publisher:Edward J. Vanderbeck, Maria R. Mitchell

Chapter8: Standard Cost Accounting—materials, Labor, And Factory Overhead

Section: Chapter Questions

Problem 20P: Jillian Manufacturing Inc. manufactures a single product and uses a standard cost system. The...

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Golden Marine Stores Company manufactures special metallic materials and decorative fittings for luxury yachts that require highly skilled labor. Golden uses standard costs to prepare its flexible budget. For the first quarter of the year, direct materials and direct labor standards for one of their popular products were as follows:

Direct materials:

pounds per unit;

per pound

Labor:

hours per unit;

$20

per hour

During the first quarter, Golden produced

5,000

units of this product. At the end of the quarter, an examination of the direct materials records showed that the company used

14,500

pounds of direct materials and the direct materials cost variance was

$3,780

U. Which of the following is a logical explanation for this variance?

The company used more labor hours than allowed by the standards.

The company paid a higher cost per hour for labor than allowed by the standards.

The company paid a higher cost for the direct materials than allowed by the standards.

The company used a greater quantity of direct materials than allowed by the standards.

Definition Definition System of assigning an estimated cost to the product (instead of the actual cost) so that the product cost can be determined well in advance and the pricing of the product can be done on time. Since the actual cost cannot be predicted at the initial stage of the production process, the estimated cost is recorded in the books. Any deviation of the estimated cost of the actual cost is adjusted in the books at the end of the period.

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