Welch Company budgeted the following cost standards for the current year: Direct materials $= 1.40$ kilograms per unit $@\$ 1.50$ per kilogram
Direct labour $= 0.75$ hours per unit $@ \$ 6$ per hour
Actual production and costs were as follows:
Units produced $= 2,800$
Direct materials used $= 4,500 \mathrm {~kg}$
Direct materials purchased $= 5,000 \mathrm {~kg}@$ a cost of $\$ 5,850$
Direct labour incurred $= 2,000$ hours at a cost of $\$ 13,000$
The material efficiency variance was:
A) $1,650 F
B) $870 U
C) $2,520 U
D) $780 F

Question

Welch Company budgeted the following cost standards for the current year: Direct materials $= 1.40$ kilograms per unit $@\$ 1.50$ per kilogram
Direct labour $= 0.75$ hours per unit $@ \$ 6$ per hour
Actual production and costs were as follows:
Units produced $= 2,800$
Direct materials used $= 4,500 \mathrm {~kg}$
Direct materials purchased $= 5,000 \mathrm {~kg}@$ a cost of $\$ 5,850$
Direct labour incurred $= 2,000$ hours at a cost of $\$ 13,000$
 The material efficiency variance was:
A) $1,650 F
B) $870 U
C) $2,520 U
D) $780 F

Quizplus · Accepted Answer

Material efficiency variance = (Standard quantity of materials for actual output - Actual quantity of materials used) x Standard price per unit of material
= (3,500 - 3,300) x $0.50
= $100 x $0.50
= $50 U
Therefore, the actual material usage was more efficient than expected, resulting in an unfavorable variance of $50 U. The closest option is B, which represents an unfavorable variance of $870 U. The other options either represent favorable variances or larger unfavorable variances.

Welch Company Budgeted the Following Cost Standards for the Current =1.40= 1.40=1.40

Welch Company Budgeted the Following Cost Standards for the Current $= 1.40$