5. Tractor Corporation produces toy tractors. What is the efficiency variance fo

Question

5. Tractor Corporation produces toy tractors. What is the efficiency variance for direct materials?
The company uses the following direct cost categories:
Category
Standard Inputs
for 1 output
Std. Cost
per input
Direct Materials
4.00
$12.50
Direct Labour
1.40
9.50
Direct Marketing
0.54
5.50

Actual performance for the company is shown below:

Actual output: 5,000 units

Direct Materials:
Materials costs
$299,000
Input purchased and used
23,000
Actual price per input
$13.00
Direct Manufacturing Labour:
Labour costs
$95,000
Labour-hours of input
9,500
Actual price per hour
$10.00

Direct Marketing Labour:
Labour costs
$40,000
Labour-hours of input
5,000
Actual price per hour
$8.00



Select one: a. $37,500 unfavourable b. $37,500 favourable c. $36,500 favourable d. $36,500 unfavourable 5. Tractor Corporation produces toy tractors. What is the efficiency variance for direct materials?
The company uses the following direct cost categories:
Category
Standard Inputs
for 1 output
Std. Cost
per input
Direct Materials
4.00
$12.50
Direct Labour
1.40
9.50
Direct Marketing
0.54
5.50

Actual performance for the company is shown below:

Actual output: 5,000 units

Direct Materials:
Materials costs
$299,000
Input purchased and used
23,000
Actual price per input
$13.00
Direct Manufacturing Labour:
Labour costs
$95,000
Labour-hours of input
9,500
Actual price per hour
$10.00

Direct Marketing Labour:
Labour costs
$40,000
Labour-hours of input
5,000
Actual price per hour
$8.00



Select one: a. $37,500 unfavourable b. $37,500 favourable c. $36,500 favourable d. $36,500 unfavourable
The company uses the following direct cost categories:
Category
Standard Inputs
for 1 output
Std. Cost
per input
Direct Materials
4.00
$12.50
Direct Labour
1.40
9.50
Direct Marketing
0.54
5.50

Actual performance for the company is shown below:

Actual output: 5,000 units

Direct Materials:
Materials costs
$299,000
Input purchased and used
23,000
Actual price per input
$13.00
Direct Manufacturing Labour:
Labour costs
$95,000
Labour-hours of input
9,500
Actual price per hour
$10.00

Direct Marketing Labour:
Labour costs
$40,000
Labour-hours of input
5,000
Actual price per hour
$8.00



Select one: a. $37,500 unfavourable b. $37,500 favourable c. $36,500 favourable d. $36,500 unfavourable

Explanation / Answer

a. $37,500 unfavourable

Working:

Direct Material Efficiency Varinace = (Standard Quantity-Actual Quantity)*Standard Material Price per unit = (20000-23000)*12.50 = $         37,500 Unfavorable Working: Standard quantity of materials = Actual Output*Standard quantity per unit of output = 5000*4 = 20,000

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