Question

Golden Marine Stores Company manufactures special metallic materials and decorative fittings for luxury yachts that require highly skilled labor. Golden 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 pounds per unit; $3 per pound
Labor: 4 hours per unit; $20 per hour
During the first quarter, Golden produced 5,000 units of this product. At the end of the quarter, an examination of the direct materials records showed that the company used 9,500 pounds of direct materials and the direct materials cost variance was $3,750 U. Which of the following is a logical explanation for this variance?
A) The company used more labor hours than allowed by the standards.
B) The company paid a higher cost per hour for labor than allowed by the standards.
C) The company used a greater quantity of direct materials than allowed by the standards.
D) The company paid a higher cost for the direct materials than allowed by the standards.

Answer 1

The logical explanation for the direct materials cost variance of $3,750 U can be attributed to the company using a greater quantity of direct materials than allowed by the standards.

Step-by-step explanation:

The logical explanation for the direct materials cost variance of $3,750 U is that the company used a greater quantity of direct materials than allowed by the standards. The standard quantity of direct materials for each unit is 2 pounds, but the company actually used 9,500 pounds for the production of 5,000 units. This means the company used an average of 1.9 pounds per unit, which is higher than the standard.