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: $$\begin{array} { | l | l | l | } \hline \text { Labour rate variance: } & \$ 7,000 & \mathrm {~F} \\\hline \text { Labour efficiency variance: } & \$ 12,000 & \mathrm {~F} \\\hline \text { Variable overhead efficiency variance: } & \$ 4,000 & \mathrm {~F} \\\hline \text { Number of units produced: } & 10,000 & \\\hline \text { Standard labour rate per direct labour hour: } & \$ 12 & \\\hline \text { Standard variable overhead rate per direct labour hour: } & \$ 4 & \\\hline \text { Actual labour hours used: } & 14,000 & \\\hline \text { Actual variable manufacturing overhead costs: } & \$ 58,290 & \\\hline\end{array}$$
-Which of the following is not correct

A) If the denominator level of activity is greater than the standard hours allowed for the output of the period, then the volume variance is unfavourable.
B) If the denominator level of activity and the standard hours allowed for the output of the period are the same, then there is no volume variance.
C) If the denominator level of activity is greater than the standard hours allowed for the output of the period, then the volume variance is favourable.
D) The volume variance is an appropriate measure of the utilization of plant facilities.

Correct Answer:

Verified

Unlock this answer now
Get Access to more Verified Answers free of charge

Access For Free