7-28 Direct materials and direct manufacturing labor variances. Sally May, Inc., designs and manufac- tures T-shirts. It sells its T-shirts to brand-name clothes retailers in lots of one dozen. SallyMay's May 2016 static budget and actual results for direct inputs are as follows: Static Budget Number of T-shirt lots (1 lot = 1 dozen) 400 Per Lot of Jackets: Direct matenals Direct manufacturing labor 14 meters at $170 per meter = $23.80 16 hours at Sa 10 per hour = $12.96 Actual Results Number of T-shirt lots sold 450 Total Direct Inputs Direct materials 6.840 meters at $1.95 per meter = $13,338 Direct manufacturing labor 675 hours at $8 20 per hour - $6,535 Sally May has a policy of analyzing all input variances when they add up to more than 10% of the total cost of materials and labor in the flexible budget, and this is true in May 2016. The production manager discusses the sources of the variances "A new type of material was purchased in May. This led to faster cutting and sewing. but the workers used more material than usual as they learned to work with it. For now, the standards are fine." 1. Calculate the direct materials and direct manufacturing labor price and efficiency variances in May 2016. What is the total flexible-budget variance for both inputs (direct materials and direct manufactur- ing labori combined? What percentage is this variance of the total cost of direct materials and direct manufacturing labor in the flexible budget? 2 Comment on the May 2016 results. Would you continue the "experiment" of using the new material? 7-34 Flexible budget direct materials, and direct manufacturing labor variances. Milan Statuary manu- factures bust statues of famous historical figures. All statues are the same size. Each unit requires the same amount of resources. The following information is from the static budget for 2017 Expected production and sales 6,100 units Expected selling price per unit $ 700 Total fixed costs $1,350,000 Standard quantities, standard prices, and standard unit costs follow for direct materials and direct manu- facturing labor: Standard Quantity Standard Price Standard Unit Cost Direct materials 16 pounds $14 per pound $224 Direct manufacturing labor 3.8 hours $30 per hour $114 During 2017, actual number of units produced and sold was 5,100, at an average selling price of $780. Actual cost of direct materials used was $1,149,400, based on 70,000 pounds purchased at $16.42 per pound Direct manufacturing labor-hours actually used were 17,000, at the rate of $33.70 per hour. As a result, actual direct manufacturing labor costs were $572.900. Actual fixed costs were $1,200,000. There were no beginning or end ing inventories 1. Calculate the sales-volume variance and flexible-budget variance for operating income 2. Compute price and efficiency variances for direct materials and direct manufacturing labor