Melissa Company has collected the following data for one of its products: $$\begin{array} { | l | r | }
\hline \text { Direct materials standard (5 pounds } @ \$ 1 / \mathrm { b } \text {. ) } & \$ 5 \text { per finished good } \
\hline \text { Direct materials flexible budget variance-unfavorable } & \$ 14,000 \
\hline \text { Actual direct materials used } & 100,000 \text { pounds } \
\hline \text { Actual finished goods produced } & 18,000 \text { units } \
\hline
\end{array}$$ How much is the direct materials efficiency variance?
A) $18,000 U
B) $10,000 F
C) $10,000 U
D) $18,000 F

Question

Melissa Company has collected the following data for one of its products: $$\begin{array} { | l | r | } 
\hline \text { Direct materials standard (5 pounds } @ \$ 1 / \mathrm { b } \text {. ) } & \$ 5 \text { per finished good } \
\hline \text { Direct materials flexible budget variance-unfavorable } & \$ 14,000 \
\hline \text { Actual direct materials used } & 100,000 \text { pounds } \
\hline \text { Actual finished goods produced } & 18,000 \text { units } \
\hline
\end{array}$$ How much is the direct materials efficiency variance?
A) $18,000 U
B) $10,000 F
C) $10,000 U
D) $18,000 F

Quizplus · Accepted Answer

The direct materials efficiency variance formula is:
DM efficiency variance = (Standard quantity of DM for actual output - Actual quantity of DM used) x Standard price of DM
We know the standard quantity of DM is 5 pounds per finished good and the actual finished goods produced is 18,000 units. Therefore, the standard quantity of DM for actual output is:
5 pounds/finished good x 18,000 finished goods = 90,000 pounds
Now we can calculate the direct materials efficiency variance:
DM efficiency variance = (90,000 - 100,000) x $1/pound = $10,000 U
Therefore, the correct answer is choice C.

Melissa Company Has Collected the Following Data for One of Its