Golden Marine Stores Company manufactures special metallic materials and decorat

Question

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 2 pounds per unit, S4 per pound Labor: 4 hours per unit, S24 per hour During the first quarter, Golden produced 4,000 units of this product. At the end of the quarter, an examination of the direct materials records showed that the company used 7,500 pounds of direct materials and the direct materials cost variance was $3,750 U. Which of the following is a logical explanation for this variance? A. The company paid a higher cost for the direct materials than allowed by the standards O B. The company paid a higher cost per hour for labor than allowed by the standards. ° C. The company used more labor hours than allowed by the standards. O D. The company used a greater quantity of direct materials than allowed by the standards

Explanation / Answer

In this question explanation B or C is not applicable because Labour cost, labour hour is not given for comparision and explantion D for Greater quantity is not logical explanation because standard quantity for material allowed is (4000*2)=8000 but actual quantity used 7500 pounds so explanation D is not logical explanation...

but explanation A is logical explanation because material cost variance is unfavourable so company paid higher cost for the direct mateials than allowed by the standards.

so answer is a) The company paid a ighher cost for the direct materials than allowed by the standards

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