Materials and manufacturing labor variances, standard costs. Dunn, Inc. is a privately held furniture manufacturer. For August 2009, Dunn had the following standards for one of its products, a wicker chair:

The following data were compiled regarding actual performance: actual output units (chairs) produced, 2,000; square yards of input purchased and used 3,700; price per square yard, $5.10; direct manufacturing labor costs, $8,820; actual hours of input 900; labor price per hour, $9.80.

1.         Show computations of price and efficiency variances for direct materials and direct manufacturing labor give a plausible explanation of why each variance occurred.

2.         Suppose 6,000 square yards of materials were purchased (at $5.10 per square yard), even though only. 3,700 square yards were used. Suppose further that variances are identified at their most timely control point; accordingly, direct materials price variances are isolated and traced at the time of purchase to the Purchasing Department rather than to the Production Department. Compute the price and efficiency variances under this approach.

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Standards per Chair 2 square yards of input at $5 per square yard 0.5 hour of input at $10 per hour Direct materials Direct manufacturing labor