7-27 Analysis of Variances (SIA, adapted) The Alpha Co. Ltd. produces toys for national distribution. The management has recently established a standard- cost system to control costs. Established standard costs are:

(a) Materials: 12 pieces per unit at 56 per piece

(b) Labor: 2 hours per unit at $2.75 per hour During the month of December 1966, the company produced 1,000 units of finished goods. Production information for December is as follows:

(a) Materials: 14,000 pieces at a total cost of $7,140

(b) Labor costs: $8,000

(c) Direct-labor hours worked were 2,500

(d) Inventories: December 1, nil December 31, nil 1. Computation of material price and efficiency variances and labor-price and efficiency variances. 2. A brief explanation to management giving the significance of each variance.