Question
TaskMaster Enterprises employs a standard cost system in which direct materials inventory is carried at standard cost. TaskMaster has established the following standards for the prime costs of one unit of product.
Standard Standard Standard
Quantity Price Cost
Direct Materials 8 1.50 per pound $12.00
Direct Labor 0.25 6.20 per hour $1.55
13.55
During November, TaskMaster purchased 184,000 pounds of direct materials at a total cost of $331,200. The total factory wages for November were $38,000, 90% of which were for direct labor. TaskMaster manufactured 22,000 units of product during November using 162,000 pounds of direct materials and 6,000 direct labor hours. What is the direct materials efficiency variance for November
Answer:
Efficiency Variance $21,000 favorable
Explanation:
Direct material efficiency( usage variance) occurs when the actual quantity used used to achieve a given output is more or less than the standard quantity allowed to achieve same.
It will be computed as follows:
Pounds
22,000 units should have used (22,000 × 8) 176,000
but did use (actual quantity) 162,000
Efficiency variance (in pounds) 14000 favorable
Standard price × $1.50
Efficiency Variance $21,000 favorable
