Question

In its first month of operations, Multiplex Corporation purchased 40,000 pounds of material for $3.40 per pound. The company used 38,000 pounds of the material to produce 18,000 units of its only product. Multiplex uses a standard cost system and its standard quantity and price per unit are 2 pounds at $3.50 per pound. What was the material efficiency variance for the month

Answer 1

$7,000 Unfavorable

Step-by-step explanation:

data provided

Material in units = 18,000

Price per unit = 2

Actual hours = 38,000

Selling price = $3.50

The computation of material efficiency variance is shown below:-

Materials efficiency variance = (Standard hours - Actual hours) × Selling price

= (18,000 × 2 - 38,000) × $3.50

= $7,000 Unfavorable

Therefore for computing the material efficiency variance we simply applied the above formula.