7.41 Rate and efficiency variances, prot ions Inc. manufactures shirts for retail chains. Ans in standard-setting, benchmarking. New Fashdisenchanted with New Fashions's standard-costing systemson, the controller, is becoming increasingly materials and direct manufacturing labour for June were as following. There Standard costs are based on a study of the materials. months earlier. Jorgenson observes that, since thaperations conducted by an independent consultant six any magnitude. He notes that even at their current output levels, the workers seen anfavourable variance of sitting around and gossiping. Jorgenson is concerned that the protsers seem to have a lot of time for aware of this but does not want to tighten up the standards because the manager, Charlie Fenton, is mance look good. Required 1. Compute the rate and efficiency variances of New Fashions for direct materials and direct manufacturing labour in June. 2. Describe the types of actions the employees at New Fashions may have taken to reduce the accuracy of the standards set by the independent consultant. Why would employees take those actions? Is this behaviour ethical? 3. If Jorgenson does nothing about the standard costs, will his behaviour violate any ethical conduct guidelines? 4. What actions should Jorgenson take? 5orgenson can obtain benchmarking information about the estimated costs of New Fashions's major competitors from Benchmarking Clearing House (BCH). Discuss the pros and cons of using the BCH information to compute the variances in requirement 1