Use the information below to answer the following question(s).Sawyer Industries Inc.(SII), developed standard costs for direct material and direct labour.In 2019, SII estimated the following standard costs for one of their major products, the 30-litre heavy-duty plastic container. During July 2020, SII produced and sold 10,000 containers using 2,200 kilograms of direct materials at an average actual cost per kilogram of $24 and 1,050 direct manufacturing labour hours at an average actual wage of $14.75 per hour.
-July's direct material efficiency variance is
A)$4,800 favourable.
B)$2,200 favourable.
C)$5,000 unfavourable.
D)$5,000 favourable.
E)$4,800 unfavourable.

Question

Use the information below to answer the following question(s).Sawyer Industries Inc.(SII), developed standard costs for direct material and direct labour.In 2019, SII estimated the following standard costs for one of their major products, the 30-litre heavy-duty plastic container.  During July 2020, SII produced and sold 10,000 containers using 2,200 kilograms of direct materials at an average actual cost per kilogram of $24 and 1,050 direct manufacturing labour hours at an average actual wage of $14.75 per hour.
-July's direct material efficiency variance is
A)$4,800 favourable. 
B)$2,200 favourable. 
C)$5,000 unfavourable. 
D)$5,000 favourable. 
E)$4,800 unfavourable.

Quizplus · Accepted Answer

To calculate the direct material efficiency variance, we use the formula:

(Direct Material Standard Quantity x Standard Price) - (Actual Quantity x Actual Price)

Direct Material Standard Quantity = 2,000 kg (10,000 containers x 0.2 kg per container)

Standard Price = $20 per kg

Actual Quantity = 2,200 kg

Actual Price = $24 per kg

Plugging in the numbers, we get:

(2,000 x $20) - (2,200 x $24) = $40,000 - $52,800 = -$12,800

Since the actual quantity used is greater than the standard quantity allowed, the variance is unfavorable. Therefore, the answer choice is C) $5,000 unfavorable.

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