Cateye Corporation Company budgeted 600 pounds of direct materials costing $27.00 per pound to make 6,000 units of product.The company actually used 585 pounds of direct materials costing $28.00 per pound to make the 6,000 units.What is the direct materials efficiency variance?

Question

Quizplus · Accepted Answer

Direct materials efficiency variance measures the difference between the actual quantity of materials used and the budgeted quantity of materials required to produce the actual output.

Here, the budgeted quantity of materials required to produce 6,000 units = 600 pounds × $27 = $16,200 
The actual quantity of materials used to produce 6,000 units = 585 pounds × $28 = $16,380

Therefore, the direct materials efficiency variance = (standard quantity of materials for actual output - actual quantity of materials used) × standard price per unit of material 
= (600 pounds - 585 pounds) × $27 
=  $405 unfavorable

Hence, the correct answer is D) $420 unfavorable.

Cateye Corporation Company Budgeted 600 Pounds of Direct Materials Costing