Let's break down the problem and solve it step by step. ### **Step 1: Understand the Problem** **Given:** - Backpacks produced: **1,050** - Standard cost: **4 yards of cloth/backpack** **$0.90/yard** - Actual cloth used: **2,600 yards** - Actual cost per yard: **$1.05** - **Calculate:** **Direct Materials Efficiency Variance** --- ### **Step 2: Find the Relevant Formulas** #### **Direct Materials Efficiencyance:** \[ \text{Efficiency Variance} = (\text{Actual Quantity Used} - \text{Standard Quantity Allowed}) \times \text{Standard Cost per Yard} \] Where: - **Actual Quantity Used (AQ):** Actual yards of cloth used = **2,600 yards** - **Standard Quantity Allowed (SQ):** Standard yards allowed for actual production = **Number of backpacks produced} \times \text{Standard yards per backpack}** - **Standard Cost per Yard (SC):** $0.90 --- ### **Step 3: Calculate the Standard Quantity Allowed (SQ)** \[ \text{SQ} = 1,050 \text{ backpacks} \times 4 \text{ yards/backpack} = 4,200 \text{ yards} \] --- ### **Step 4: Plug Values into the Formula** \[ \text{Efficiency Variance} = (2,600 - 4,200) \times \$0.90 \] \[ = (-1,600) \times \$0.90 \] \[ = -\$1,440 \] --- ### **Step 5: Determine Favorable or Unfavorable** - If AQ < SQ, it's **favorable** (used less material than allowed) - If AQ > SQ, it's **unfavorable** (used more material than allowed) Since **AQ < SQ** (2,600 < 4,200), this is **favorable**. --- ## **Summary Table** | AQ | SQ | SC | Direct Materials Efficiency Variance | Favorable or Unfavorable | |------------|------------|-------|--------------------------------------|-------------------------| | 2,600 | 4,200 | $0.90 | $1,440 | Favorable | --- ## **Final Summary** - **Direct Materials Efficiency Variance:** $1,440 Favorable - **Reason:** The company used 1,600 yards less than the standard allowed, saving $1,440 in direct material costs.

### **Step 1: Understand the Problem** Identify the key data: 1,050 backpacks produced, standard of 4 yards per backpack at $0.90/yard, actual usage of 2,600 yards, and actual cost of $1.05/yard. The goal is to compute the Direct Materials Efficiency Variance. ### **Step 2: Find the Relevant Formula** Use the formula: \[ \text{Efficiency Variance} = (\text{Actual Quantity} - \text{Standard Quantity Allowed}) \times \text{Standard Cost per Yard} \] This measures the cost impact of using more or less material than standard. ### **Step 3: Calculate Standard Quantity Allowed (SQ)** Multiply the number of backpacks by standard yards per backpack: \[ 1,050 \times 4 = 4,200 \text{ yards} \] This is the expected material usage for actual production. ### **Step 4: Plug Values into the Formula** Subtract actual yards from standard yards: \[ 2,600 - 4,200 = -1,600 \text{ yards} \] Multiply by standard cost per yard: \[ -1,600 \times \$0.90 = -\$1,440 \] A negative result indicates a favorable variance. ### **Step 5: Determine Favorable or Unfavorable** Since actual usage is less than standard, the variance is favorable. The company saved $1,440 in material costs due to efficiency. ### **Final Summary** The direct materials efficiency variance is **$1,440 Favorable**, indicating less material was used than planned, resulting in cost savings.

The company's direct materials efficiency variance is $1,440 favorable, as it used 1,600 yards less than the standard allowance. This reflects cost savings resulting from more efficient material usage.