7-25 Materials and manufacturing labour variances, standard costs with inventory. Keats Inc. is a privately held furniture manufacturer. For August 2018, the company 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 metres of input purchased and used, 3,700; price per square metre, \$5.10; direct manufacturing labour costs, $8,820; actual hours of input, 900 ; labour price per hour, $9.80. Required 1. Show your computations on the rate and efficiency variances for direct materials and for direct manufacturing labour. Give a plausible explanation of why the variances occurred. 2. Suppose 6,000 square metres of materials were purchased (at $5.10 per square metre) even though only 3,700 square metres were used. Suppose further that variances are identified with their most likely control point; accordingly, direct materials price variances are isolated and traced to the purchasing department rather than to the production department. Compute the rate and efficiency variances under this approach. 7-26 Journal entries and T-accounts (continuation of 7-25). Prepare journal entries and post them to T-accounts for all transactions in Exercise 7-25, including requirement 2. Summarize how these journal entries differ from normal costing entries