Question

Jones Company has budgeted 5 yards of direct materials per chair at a standard cost of $10 per yard. During January, 2,000 actual yards were purchased and used, completing 410 chairs. All were sold and Jones Company actually paid $13 per yard. What is the direct materials efficiency variance?

Answer 1

Direct materials efficiency variance=-$500

Step-by-step explanation:

Direct materials efficiency variance is the difference between the actual quantity of direct materials and the standard or budgeted quantity of direct materials multiplied by the standard cost of direct materials.

Step 1: Calculate the actual quantity of direct materials

Actual quantity=2,000 yards

Step 2: Calculate the budgeted quantity of direct materials

Budgeted quantity=rate per chair×actual number of chairs produced

Budgeted quantity=(5×410)=2,050 yards

Step 3: Calculate the standard rate of direct materials

Standard rate=$10 per yard

Step 4: Calculate the direct materials efficiency variance

Direct efficiency variance=(Actual labor-budgeted labor)×standard price

where;

Actual labor=2,000 yards

Budgeted labor=2,050 yard

Standard price=$10 per hour

replacing;

Direct labor efficiency variance=(2,000-2,050)×10

Direct labor efficiency variance=-$500