Welch Company budgeted the following cost standards for the current year: Direct materials = 1.40 kilograms per unit @ $1.50 per kilogram
Direct labour = 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 labour 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. The standard quantity allowed for 2,800 units is 2,800 x 1.40 kg = 3,920 kg. The actual quantity used is 4,500 kg. The variance is (4,500 - 3,920) x $1.50 = $870 Unfavorable.

Welch Company Budgeted the Following Cost Standards for the Current