Allen Boating Company manufactures special metallic materials and decorative fittings for luxury yachts that require highly skilled labor. Allen 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 pound per unit; $ 12 per pound Direct labor: 2 hours per unit; $ 19 per hour Allen produced 3 comma 000 units during the quarter. At the end of the quarter, an examination of the direct materials records showed that the company used 6 comma 500 pounds of direct materials and actual total materials costs were $ 99 comma 900. What is the direct materials efficiency variance?

Question

Business

Dean Moore

17 January, 09:55

Allen Boating Company manufactures special metallic materials and decorative fittings for luxury yachts that require highly skilled labor. Allen 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 pound per unit; $ 12 per pound Direct labor: 2 hours per unit; $ 19 per hour Allen produced 3 comma 000 units during the quarter. At the end of the quarter, an examination of the direct materials records showed that the company used 6 comma 500 pounds of direct materials and actual total materials costs were $ 99 comma 900. What is the direct materials efficiency variance?

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Answers (1)

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Aditya Koch · Answer 1

42,000 unfavorable

Explanation:

The computation of the direct materials efficiency variance is shown below:

= (Actual quantity - Standard quantity) * standard price

= (6,500 pounds - 3,000 pounds) * $12 per pound

= 3,500 pounds * $12 per pound

= 42,000 unfavorable

Since the standard quantity is less than the actual quantity so the direct material efficiency variance would come unfavorable

All other information which is given is not relevant. Hence, ignored it