Emerald Marine Stores Company manufactures decorative fittings for luxury yachts

Question

Emerald Marine Stores Company manufactures decorative fittings for luxury yachts that require highly skilled labor, and special metallic materials. Emerald uses standard costs to prepare its flexible budget. For the first quarter of 2015, direct material and direct labor standards for one of their popular products were as follows. Direct materials: 1 pound per unit; $-4 per pound. Direct labor: 4 hours per unit; $15 per hour Emerald produced 5,000 units during the quarter. At the end of the quarter, an examination of the materials records showed that the company used 7,000 pounds of materials and actual total material costs were $98,000. Calculate the direct materials efficiency variance $2,000 u S2.000F $8,000 $8,000 F

Explanation / Answer

Emerald Marine Stores Direct material std qty/unit 1 Direct Materials std rate /pound                                     4 Production in qtr units                             5,000 Materials used                             7,000 Actual Qty /unit                               1.40 Cost of material used                           98,000 Actual rate/Pound                                   14 Std Qty of Direct material for 5000 units                             5,000 Material efficiency Variance= Std rate ( Actual use -Std use for actual production) = 4(7000-5000) = 8000 U So direct material efficiency variance =$8,000 U

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