7-24 Elementary Variance Analysis and Graph Consider the following data regard- ing the manufacture of 20,000 units (pairs) of boots: Direct materials Direct labor STANDARDS Two pounds of input at $4 per pound, or $8 per unit of output One half hour of input at $10 per hour, or $5 per unit of output The following data were compiled regarding actual performance: good units produced, 20,000; pounds of input acquired and used, 37,000; price per pound, $4.10; direct-labor costs, $88,200; actual hours of input, 9,000; labor rate per hour, $9.80. 1. Show computations of price and efficiency variances for direct materials and for direct labor. Prepare a plausible explanation of why the variances arose. 2. Sketch a graphical analysis of the direct-labor variance, using the vertical axis for total costs and the horizontal axis for volume or activity in hours. Indicate what vertical distances represent the flexible budget variance, price variance, and efficiency variance. 3. Suppose 60,000 pounds of materials were purchased even though only 37,000 pounds were used. Suppose further that variances are identified with their most likely control point; accordingly, direct-material purchase-price variances are isolated and traced to the purchasing department rather than to the pro- duction department. Compute the price and efficiency variances under this approach.