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: 1 pound per unit; $11 per pound Direct labor: 4 hours per unit; $19 per hour Allen produced 4,000 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

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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: 1 pound per unit; $11 per pound Direct labor: 4 hours per unit; $19 per hour Allen produced 4,000 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

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SociometricStar SociometricStar · Answer 1 · 2025-03-21T22:36:56-04:00

Answer:

Direct Material Efficiency Variance = $38,500 Unfavorable

Further Explanation:

• Efficiency refers to the ability to perform certain task within the constraint provided.

• Here, as for the information provided each unit of finished product requires 1 Pound of raw material.

• Therefore, for actual production of 4,000 units as per standard frame we require 4,000 X 1 Pound of raw material = 4,000 pounds.

• Actual usage of raw material was 7,500 pounds.

The formula to calculate direct material efficiency variance is as follows:

(Standard Raw material for actual output – Actual raw material used) [tex]\times[/tex] Standard rate of raw material per unit.

Here, as stated above standard raw material for actual output = 4,000 pounds, and actual usage is 7,500 pounds.

Standard rate per pound is given $11 per pound

Therefore, Direct material efficiency variance is given by

[tex](4000-7500)\times11\\\\= \-$38,500[/tex]

Since, the value is negative hence, it is Unfavorable.

This concludes that raw material was used in excess of the requirement and that the efficiency is negative.

Learn More:

• About variances

• About material variances

Key Words:

• Material variance

• Efficiency variance

• Standard Costing

ritu035sds ritu035sds · Answer 2 · 2025-03-21T22:36:46-04:00

The direct materials efficiency variance is [tex]\fbox{\begin{minispace}\\\mathbf{\$38,500\text{Unfavorable}}\end{minispace}}[/tex].

Further explanation:

Variance: The difference between the actual and budgeted figure is termed as the variance. The variance is computed for all the costs and the revenue of the organization.

Direct materials efficiency variance: The direct materials efficiency variance is the difference between the standard quantity and actual quantity of the direct materials used at the actual level of the production. The difference is multiplied by the standard price as well.

Calculate the direct materials efficiency variance:

4,000 units have been produced during the year, and it was budgeted to use 1 pound per unit. But the organization has used 7,500 pounds during the year. The standard price is $11 per pound.

[tex]\text{Direct materials efficiency variance}=\left{\text{(Standard Quantity}-\text{Actual Quantity)}\times\text{Standard rate}\right}\\=((1\times4,000)-7,500)\times\$11\\=-3,500\times\$11\\=\$38,500\text{ U}[/tex]

Therefore, the direct materials efficiency variance is [tex]\fbox{\begin{minispace}\\\mathbf{\$38,500\text{Unfavorable}}\end{minispace}}[/tex].

The unfavorable variance represents that more direct materials have been consumed than the standard direct materials.

Learn more

1. Breakeven point and contribution margin https://brainly.com/question/12989446

2. Period costs to sell a particular product https://brainly.com/question/8529520

3. Cost of materials https://brainly.com/question/4783765

Answer details

Grade: Senior School

Subject: Cost Accounting

Chapter: Standard costing

Keywords: Allen Boating Company, manufactures special metallic materials and decorative fittings, metallic materials, standard costing, material, pound per unit, decorative fittings, luxury yachts, direct materials, direct labor, pounds of direct materials, materials efficiency variance, skilled labor, variance, direct materials variance, efficiency variance, standard quantity, standard price.