Comprehensive variance analysis. Pacific Furniture is an elite desk manufacturer. At the start ofMay 2007, the following budgeted unit amounts (based on a standard costing system)

related to its manufacture of executive desks (made out of oak):

Direct materials:

1.6 square metres of oak per desk

$24 per square metre Direct manufacturing labour:

3 hours per desk

$36 per direct manufacturing labour-hour Budgeted production for May 2007 was 700 executive desks. There were no begin¬

ning inventories of direct materials or finished goods on May 1, 2007. Work in

• • • i FLEXIBLE BUDGETS, process is minimal.

Actual results for May 2007 are as follows:

Direct materials purchased (1,264 square metres) $31,094 Direct materials used (1,185 square metres) ?

Direct manufacturing labour (2,325 hours at $37 per hour) ?

Actual production in May 2007 is 750 executive desk units. A constant purchase price for oak wood existed in May 2007.

Required 1. Prepare a detailed flexible-budget variance analysis for May 2007 covering direct materials and direct manufacturing labour.

2. Give two explanations for each of the variances you compute in requirement 1.