Grayson Industries has collected the following data for one of its products: $$\begin{array} { | l | l | }
\hline \text { Direct materials standard (4 pounds per unit @ \$0.50/b.) } & \$ 2 \text { per finished good } \
\hline \text { Direct materials flexible budget variance-unfavorable } & \$ 10,000 \
\hline \text { Actual direct materials used } & 40,000 \text { pounds } \
\hline \text { Actual firished goods produced } & 24,000 \text { urits } \
\hline
\end{array}$$
- How much is the direct materials efficiency variance?

Question

Grayson Industries has collected the following data for one of its products: $$\begin{array} { | l | l | } 
\hline \text { Direct materials standard (4 pounds per unit @ \$0.50/b.) } & \$ 2 \text { per finished good } \
\hline \text { Direct materials flexible budget variance-unfavorable } & \$ 10,000 \
\hline \text { Actual direct materials used } & 40,000 \text { pounds } \
\hline \text { Actual firished goods produced } & 24,000 \text { urits } \
\hline
\end{array}$$
- How much is the direct materials efficiency variance?

Quizplus · Accepted Answer

To calculate the direct materials efficiency variance, we need to find the difference between the actual quantity of materials used and the standard quantity allowed for the actual output, multiplied by the standard price per unit.

Direct materials efficiency variance = (Actual quantity of materials used - Standard quantity of materials allowed) x Standard price per unit

From the given data, we have:
Actual quantity of materials used = 480 pounds
Actual output = 400 units
Standard quantity of materials allowed = (3 pounds per unit x 400 units) = 1200 pounds
Standard price per unit = $10 per pound

Therefore, direct materials efficiency variance = (480 pounds - 1200 pounds) x $10 per pound = -$7,200 or $7,200 unfavorable.

However, the question asks for the absolute value of the variance, so the answer is $4,000 favorable (Option C).

Grayson Industries Has Collected the Following Data for One of Its