Allen Boating Company manufactures special metallic materials and decorative fit

Question

Allen Boating Company manufactures special metallic materials and decorative fittings for luxury yachts that require highly skilled labor. Allen uses, standard coils 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 follows: Direct materials: 1 pound per unit; $11 per pound Direct labor: 2 hours per unit: $18 per hour Allen produced 2,000 units during the quarter At the end of the quarter, an examination of the direct material; records showed that the company used 6,500 pounds of direct materials and actual total materials costs were S99,600. What is the direct materials efficiency variance? $22,000 U $49,500 U 22,000 F $49,500 F

Explanation / Answer

The answer is option B. $49,500U.

Direct materials efficiency variance:

= (Actual quantity used × Standard price) (Standard quantity allowed × Standard price)

= [6,500 pounds ×$11] – [(2,000 units × 1 pound) × $11]

= $71,500 - $22,000

=$49,500U

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