Faas Marine Stores Company manufactures decorative fittings for luxury yachts which require highly skilled labor, and special metallic materials. Faas uses standard costs to prepare its flexible budget. For the first quarter of 2011, direct material and direct labor standards for one of their popular products were as follows: During the first quarter, Faas produced 5,000 units of this product. At the end of the quarter, an examination of the materials records showed that the company used 7,000 pounds of materials and actual total material costs were $29,750. The direct materials efficiency variance was $2,000 F. Which of the following would be a logical explanation for this variance?

Question

Faas Marine Stores Company manufactures decorative fittings for luxury yachts which require highly skilled labor, and special metallic materials. Faas uses standard costs to prepare its flexible budget. For the first quarter of 2011, direct material and direct labor standards for one of their popular products were as follows:  During the first quarter, Faas produced 5,000 units of this product. At the end of the quarter, an examination of the materials records showed that the company used 7,000 pounds of materials and actual total material costs were $29,750. The direct materials efficiency variance was $2,000 F. Which of the following would be a logical explanation for this variance?

Quizplus · Accepted Answer

The direct materials efficiency variance measures the difference between the actual quantity of materials used and the standard quantity of materials allowed for the level of output achieved. In this case, the actual quantity of materials used (7,000 pounds) was less than the standard quantity of materials allowed (5,000 units x 1.5 pounds per unit = 7,500 pounds). This means that the company used a lower quantity of materials than allowed by standards, resulting in a favorable efficiency variance.

Faas Marine Stores Company Manufactures Decorative Fittings for Luxury Yachts