SeaKist Marine Stores Company manufactures decorative fittings for luxury yachts,which require highly skilled labor,and special metallic materials.SeaKist uses standard costs to prepare its flexible budget.For the first quarter of 2014,direct material and direct labor standards for one of their popular products were as follows: Materials: 1.5 pounds per unit; $4 per pound
Labor: 2 hours per unit; $18 per hour
During the first quarter,SeaKist 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.The direct materials efficiency variance was $2,000 F.Which of the following would be a logical explanation for this variance?

Question

Quizplus · Accepted Answer

The direct materials efficiency variance measures the difference between the actual quantity of materials used and the standard quantity allowed, multiplied by the standard price. In this case, the standard quantity allowed for 5,000 units is 7,500 pounds (1.5 pounds per unit * 5,000 units). However, the company used only 7,000 pounds, which is 500 pounds less than the standard. Since the actual quantity used is less than the standard quantity allowed, the variance is favorable and denoted by F (for "favorable"). Therefore, option C is the best choice as it explains that the company used a lower quantity of materials than was allowed by the standards, resulting in a favorable variance.

SeaKist Marine Stores Company Manufactures Decorative Fittings for Luxury Yachts,which