# 2 direct materials efficiency variance 1800 favorable

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Chapter 3 / Exercise 81
Elementary and Intermediate Algebra: Algebra Within Reach
Larson
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2.Direct materials efficiency variance, \$1,800 favorable.3.Direct manufacturing labor price variance, \$4,000 favorable.4.Direct manufacturing labor efficiency variance, \$600 unfavorable. Required: a.Provide the manager with some ideas as to what may have caused the price variances.b.What may have caused the efficiency variances? Answer: a.Direct materials' unfavorable price variance may have been caused by: (1) paying a higher price than the standard for the period, (2) changing to a new vendor, or (3) buying higher-quality materials. Direct manufacturing labor's favorable price variance may have been caused by: (1) changing the work force by hiring lower-paid employees, (2) changing the mix of skilled and unskilled workers, or (3) not giving pay raises as high as anticipated when the standards were set for the year. b.Direct materials' favorable efficiency variance may have been caused by: (1) employees/machinery working more efficiency and having less scrap and waste materials, (2) buying better-quality materials, or (3) changing the production process. Direct manufacturing labor's unfavorable efficiency variance may have been caused by: (1) poor working conditions, (2) changes in the production process (learning something new initially takes longer), (3) different types of direct materials to work with, or (4) poor attitudes on behalf of the workers. Diff: 3Objective: 6AACSB: Analytical thinking
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Chapter 3 / Exercise 81
Elementary and Intermediate Algebra: Algebra Within Reach
Larson
Expert Verified
34) Mayberry Company had the following journal entries recorded for the end of June. Unfortunately, the company's only accountant quit on July 10 and the president is at a loss as to the company's performance for the month of June.Materials Control300,000Direct Materials Price Variance10,000Accounts Payable Control290,000Work-in-Process Control120,000Direct Materials Efficiency Variance8,000Materials Control128,000Work-in-Process Control850,000Direct Manufacturing Labor Price Variance15,000Direct Manufacturing Labor Efficiency Variance18,000Wages Payable Control847,000Required: a.What kind of performance did the company have for June? Explain each variance.b.Why is Direct Materials given in two entries? Answer: a.The first entry is for materials purchases. The credit entry indicates a favorable variance. This could be an indicator that the purchasing agent did a good job or he/she bought inferior goods. Production was not as lucky in June. The debit entry for materials efficiency indicates that more materials were used than should have been under the operating plans for the month. For labor, the price was unfavorable, while the efficiency was favorable. This could have been caused by using higher-priced workers who were, in fact, better workers. Of course, there are many other possible causes. b.recording variances for direct materials is completed with two separate entries since the price variance is isolated at the point of purchase, while the efficiency variance is isolated at the point of use.