Assume that your superiors consider efficiency variances greater than 5% unacceptable.

You decide to look at your sales for a typical day. You find that the parlor used 390 pounds of ice cream and 72 hours of direct labor to produce and sell 2,000 shakes. Assume that the standard quantity allowed for a shake is .2 pound of ice cream and .03 hours (1.8 minutes) of direct labor. Further assume that standard costs are $1.50 per pound for ice cream and $8 an hour for labor.

1. Compute the efficiency variances for direct labor and direct materials.
2. Provide likely explanations for the variances. Do you have reason to be concerned about your performance evaluation? Explain.