Melissa Antiques Company has collected the following data for one of its products: How much is the direct materials efficiency variance?

Question

Melissa Antiques Company has collected the following data for one of its products:  How much is the direct materials efficiency variance?

Quizplus · Accepted Answer

The formula for direct materials efficiency variance is (standard quantity for actual output - actual quantity of materials used) x standard price per unit. Since no standard quantity or price is given in the question, we cannot calculate absolute variance. However, we can assume that the standard quantity is the amount of material that should be used to produce one unit of the product, and the standard price is the price at which the company buys its materials. Let's assume that the standard quantity for one unit of the product is 10 units, and the standard price per unit is $20.

Actual output = 100 units 
Actual quantity of materials used = 900 units 
(standard quantity for actual output - actual quantity of materials used) x standard price per unit = (10 x 100 - 900) x $20 = $10,000 U

Therefore, the direct materials efficiency variance is $10,000 U. The correct answer is option C.

Melissa Antiques Company Has Collected the Following Data for One