Welch Company budgeted the following cost standards for the current year: Direct materials = 1.40 kilos per unit @ $1.50 per kilo
Direct labor = 0.75 hours per unit @ $6 per hour
Actual production and costs were as follows:
Units produced = 2,800
Direct materials used = 4,500 kg.
Direct materials purchased = 5,000 kg. @ a cost of $5,850
Direct labor incurred = 2,000 hours at a cost of $13,000
The material efficiency variance was
A) $1,650 F
B) $870 U
C) $2,520 U
D) $780 F

Question

Quizplus · Accepted Answer

The material efficiency variance is calculated as (Actual Quantity Used - Standard Quantity Allowed) x Standard Price. Standard Quantity Allowed = 2,800 units x 1.40 kg/unit = 3,920 kg. Actual Quantity Used = 4,500 kg. Variance = (4,500 kg - 3,920 kg) x $1.50/kg = $870 Unfavorable.

Welch Company Budgeted the Following Cost Standards for the Current