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In: Accounting

BILL CORP HAS THE FOLLOWING DM STANDARDS: POUNDS/UNIT       2.8 COST/POUND       $1.45 BILL BOUGHT 7,500...

BILL CORP HAS THE FOLLOWING DM STANDARDS:

POUNDS/UNIT       2.8

COST/POUND       $1.45

BILL BOUGHT 7,500 POUNDS FOR $11,100. BILL USED 4,200 POUNDS TO PRODUCE 1,600 UNITS.

WHAT IS BILL’S DM EFFICIENCY VARIANCE? (AMOUNT & FAV/UNFAV)

Solutions

Expert Solution

Direct materials efficiency variance = (Actual quantity - Standard quantity) x Standard price

                                                        = (4,200 - 4,480) x $1.45

                                                        = $406 Favourable

The answer is $406 favourable.

The standard is favourable because the standard quantity is greater than the actual quantity of direct materials used.

Standard quantity has been calculated as follows:

Number of units produced = 1,600

Standard quantity for one unit = 2.8

Therefore,

Standard quantity for 1,600 units = 1,600 x 2.8 = 4,480

ekkarill92 answered 2 years ago
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