Question

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; $12 per pound
Direct​ labor: 4 hours per​ unit; $16 per hour
Allen produced 1,000 units during the quarter. At the end of the​ quarter, an examination of the direct materials records showed that the company used 7,500 pounds of direct materials and actual total materials costs were $99,300.
What is the direct materials efficiency​ variance?
Question content area bottom
Part 1
A.
$12,000 F
B.
$66,000 U
C.
$12,000 U
D.
$66,000 F

Answer 1

To calculate the direct materials efficiency variance, we need to compare the actual quantity of materials used to the standard quantity allowed for the production.

Given information:

Standard direct materials:

Quantity per unit: 2 pounds

Cost per pound: $12

Actual direct materials:

Quantity used: 7,500 pounds

Total materials cost: $99,300

Step 1: Calculate the standard quantity allowed for the production:

Standard quantity allowed = Standard quantity per unit * Number of units produced

Standard quantity allowed = 2 pounds * 1,000 units

Standard quantity allowed = 2,000 pounds

Step 2: Calculate the direct materials efficiency variance:

Direct materials efficiency variance = (Standard quantity allowed - Actual quantity used) * Standard cost per unit

Direct materials efficiency variance = (2,000 pounds - 7,500 pounds) * $12 per pound

Direct materials efficiency variance = (-5,500 pounds) * $12 per pound

Direct materials efficiency variance = -$66,000

Since the result is negative, the direct materials efficiency variance is unfavorable.

Therefore, the direct materials efficiency variance is:

B. $66,000 U (Unfavorable)