Choice "B" is correct. The materials efficiency variance is computed as:
(Actual Quantity Used − Standard Quantity Used) × Standard Price |
The fact pattern anticipates that budgeted amounts are the standard quantity allowed. As a result, the variance is computed as follows:
(9,000 board feet − 8,500 board feet) × $2$1,000 |
Because we used more than what was budgeted for, the variance is unfavorable.Choice "c" is incorrect. The variance is unfavorable, not favorable, because the company used more board feet than budgeted.Choice "d" is incorrect. The variance is unfavorable, not favorable. The materials efficiency variance is calculated using the budgeted material cost, not the actual material cost. Actual material cost is used when computing the materials price variance.Choice "a" is incorrect. The materials efficiency variance is calculated using the budgeted material cost, not the actual material cost. Actual materials cost is used when computing the material price variance.
