Dazzle Toy Company gathered the following actual results for the current month: $$\begin{array} { | l | l | }
\hline \text { Actual amounts: } & \
\text { Units produced } & 4,000 \
\hline \text { Direct materials purchased and used (5,000 lbs.) } & \$ 22,500 \
\hline \text { Direct labor cost (4,500 hours) } & \$ 51,750 \
\hline \text { Manufacturing averhead costs incurred } & \$ 24,000 \
\hline
\end{array}$$ Budgeted production and standard costs were:
$\begin{array} { | l | l | }
\hline \text { Budgeted production } & 3,500 \text { units } \
\hline \text { Direct materials } & 2 \mathrm { lbs } / \mathrm { unit } \text { at } \$ 4.25 / \mathrm { lb } . \
\hline \text { Direct labor } & 1.5 \mathrm { hrs } . / \mathrm { unit } \text { at } \$ 12.00 / \mathrm { hr } . \
\hline \text { Variable manufacturing overhead } & \$ 5 \text { per unit } \
\hline \text { Fixed manufacturing overhead } & \$ 21,000 \
\hline
\end{array}$
- What is the direct materials efficiency variance?

Question

Dazzle Toy Company gathered the following actual results for the current month: $$\begin{array} { | l | l | } 
\hline \text { Actual amounts: } & \
\text { Units produced } & 4,000 \
\hline \text { Direct materials purchased and used (5,000 lbs.) } & \$ 22,500 \
\hline \text { Direct labor cost (4,500 hours) } & \$ 51,750 \
\hline \text { Manufacturing averhead costs incurred } & \$ 24,000 \
\hline
\end{array}$$ Budgeted production and standard costs were:
$\begin{array} { | l | l | } 
\hline \text { Budgeted production } & 3,500 \text { units } \
\hline \text { Direct materials } & 2 \mathrm { lbs } / \mathrm { unit } \text { at } \$ 4.25 / \mathrm { lb } . \
\hline \text { Direct labor } & 1.5 \mathrm { hrs } . / \mathrm { unit } \text { at } \$ 12.00 / \mathrm { hr } . \
\hline \text { Variable manufacturing overhead } & \$ 5 \text { per unit } \
\hline \text { Fixed manufacturing overhead } & \$ 21,000 \
\hline
\end{array}$
-  What is the direct materials efficiency variance?

Quizplus · Accepted Answer

The direct materials efficiency variance is calculated as the difference between the actual quantity of materials used and the standard quantity of materials that should have been used, multiplied by the standard price per unit. In this case, the actual quantity of materials used was 5,000 lbs., the standard quantity of materials that should have been used was 4,000 lbs. (3,500 units x 2 lbs./unit), and the standard price per unit was $4.25. Therefore, the direct materials efficiency variance is (5,000 lbs. - 4,000 lbs.) x $4.25 = $12,750 unfavorable.

Dazzle Toy Company Gathered the Following Actual Results for the Current