Allen Boating Company manufactures special metallic materials and decorative fittings for luxury yachts that require highly skilled labor.Allen uses standard costs to prepare its flexible budget.For the first quarter of the year,direct materials and direct labor standards for one of their popular products were as follows: Direct materials: 2 pound per unit; $11 per pound
Direct labor: 2 hours per unit; $15 per hour
Allen produced 3000 units during the quarter.At the end of the quarter,an examination of the direct materials records showed that the company used 6500 pounds of direct materials and actual total materials costs were $99,300.
What is the direct materials efficiency variance?

Question

Quizplus · Accepted Answer

Direct materials efficiency variance = (Standard quantity of materials for actual output - Actual quantity of materials used) x Standard price per unit of materials

Standard quantity of materials for actual output = 2 pounds per unit x 3000 units = 6000 pounds
Actual quantity of materials used = 6500 pounds
Standard price per pound of materials = $11

Direct materials efficiency variance = (6000 - 6500) x $11 = $5500 U

Allen Boating Company Manufactures Special Metallic Materials and Decorative Fittings