Kelly Company gathered the following information for 2009:
$$\begin{array} { | l | c | c | }
\hline & \text { Direct materials } & \
\hline & \text { Product X } & \text { Product } \mathbf { X } \
\hline \text { Standard quantity per unit } & 3 \text { pounds } & 4 \text { pounds } \
\hline \text { Standard price per unit } & \$ 2.00 \text { per pound } & ? \
\hline \text { Actual quantity used per unit } & ? & 3 \text { pounds } \
\hline \text { Actual price paid for material } & \$ 2.50 \text { per pound } & \$ 5.00 \text { per pound } \
\hline \text { Price variance } & \$ 200 \text { unfavorable } & \$ 450 \text { favorable } \
\hline \text { Efficiency variance } & \$ 400 \text { favorable } & ? \
\hline \text { Flexible budget variance } & ? & \$ 2,100 \text { favorable } \
\hline
\end{array}$$ What is the efficiency variance for Product Y?
A) $1,200 favorable
B) $1,200 unfavorable
C) $1,650 unfavorable
D) $1,650 favorable

Question

Kelly Company gathered the following information for 2009:
$$\begin{array} { | l | c | c | } 
\hline & \text { Direct materials } & \
\hline & \text { Product X } & \text { Product } \mathbf { X } \
\hline \text { Standard quantity per unit } & 3 \text { pounds } & 4 \text { pounds } \
\hline \text { Standard price per unit } & \$ 2.00 \text { per pound } & ? \
\hline \text { Actual quantity used per unit } & ? & 3 \text { pounds } \
\hline \text { Actual price paid for material } & \$ 2.50 \text { per pound } & \$ 5.00 \text { per pound } \
\hline \text { Price variance } & \$ 200 \text { unfavorable } & \$ 450 \text { favorable } \
\hline \text { Efficiency variance } & \$ 400 \text { favorable } & ? \
\hline \text { Flexible budget variance } & ? & \$ 2,100 \text { favorable } \
\hline
\end{array}$$ What is the efficiency variance for Product Y?
A) $1,200 favorable
B) $1,200 unfavorable
C) $1,650 unfavorable
D) $1,650 favorable

Quizplus · Accepted Answer

To find the efficiency variance for Product Y, we first need to determine the standard cost for Product Y. Given the price variance is $450 favorable and the actual price paid is $5.00 per pound, we can calculate the standard price per unit. The price variance formula is $(SP - AP) \times AQ$, where SP is the standard price, AP is the actual price, and AQ is the actual quantity. Rearranging the formula to solve for SP gives us $SP = \frac{Price\ Variance}{AQ} + AP$. However, we directly need the efficiency variance, which is calculated as $(SQ - AQ) \times SP$, where SQ is the standard quantity and SP is the standard price.Given the flexible budget variance is $2,100 favorable and it is the sum of the price and efficiency variances, we can calculate the efficiency variance by subtracting the price variance from the flexible budget variance: $2,100 - $450 = $1,650 favorable. This calculation does not require the standard price per unit directly but follows from understanding the relationship between the variances.

Kelly Company Gathered the Following Information for 2009 What Is the Efficiency Variance for Product Y? A) $1,200

Kelly Company Gathered the Following Information for 2009 What Is the Efficiency Variance for Product Y?
A) $1,200