Reference: 11-11
the Clark Company Makes a Single Product and Uses

Reference: 11-11
The Clark Company makes a single product and uses standard costing. Variable overhead is assigned to production on the basis of direct labour hours. Some data concerning this product for the month of May follow: $$\begin{array} { | l | l | l | } \hline \text { Labour rate variance: } & \$ 7,000 & \mathrm {~F} \\\hline \text { Labour efficiency variance: } & \$ 12,000 & \mathrm {~F} \\\hline \text { Variable overhead efficiency variance: } & \$ 4,000 & \mathrm {~F} \\\hline \text { Number of units produced: } & 10,000 & \\\hline \text { Standard labour rate per direct labour hour: } & \$ 12 & \\\hline \text { Standard variable overhead rate per direct labour hour: } & \$ 4 & \\\hline \text { Actual labour hours used: } & 14,000 & \\\hline \text { Actual variable manufacturing overhead costs: } & \$ 58,290 & \\\hline\end{array}$$
-Information on Fleming Company's direct material costs follows: $$\begin{array} { | l | l | l | } \hline \text { Actual amount of direct materials used } & 20,000 & \text { grams } \\\hline \text { Actual direct material costs } & \$ 40,000 & \\\hline \text { Standard price of direct materials } & \$ 1,90 & \text { per gram } \\\hline \text { Direct material quantity variance--favourable } & \$ 5,000 & \\\hline\end{array}$$ What was the company's direct material price variance?

A) $3,000 favourable.
B) $2,000 favourable.
C) $3,000 unfavourable.
D) $2,000 unfavourable.

Correct Answer:

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