Mason, Inc. uses a standard costing system. Overhead costs are allocated based on direct labour hours. The standard variable overhead and fixed overhead rates are $1 and $5 per direct labour hour, respectively. Data relevant for the current period include: Direct materials purchased 50,000 kg. @ $12 per kg.
Direct materials used 50,000 kg.
Standard quantity of direct materials
For actual production 45,000 kg.
Direct materials standard price $13 per kg.
Direct labour costs incurred 75,000 hours @ $12 per hour
Standard direct labour hours for
Actual production 78,000 hours
Standard direct labour cost per hour $11 per hour
Variable overhead costs incurred $77,070
Fixed overhead costs incurred $381,920
The direct materials efficiency variance is:
A)$60,000 Favourable
B)$60,000 Unfavourable
C)$65,000 Favourable
D)$65,000 Unfavourable

Question

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The Answer of Mason, Inc. uses a standard costing system. Overhead costs are allocated based on direct labour hours. The standard variable overhead and fixed overhead rates are $1 and $5 per direct labour hour, respectively. Data relevant for the current period include: Direct materials purchased 50,000 kg. @ $12 per kg.
Direct materials used 50,000 kg.
Standard quantity of direct materials
For actual production 45,000 kg.
Direct materials standard price $13 per kg.
Direct labour costs incurred 75,000 hours @ $12 per hour
Standard direct labour hours for
Actual production 78,000 hours
Standard direct labour cost per hour $11 per hour
Variable overhead costs incurred $77,070
Fixed overhead costs incurred $381,920
The direct materials efficiency variance is:
A)$60,000 Favourable
B)$60,000 Unfavourable
C)$65,000 Favourable
D)$65,000 Unfavourable