Bargain Guard, which used a standard cost accounting system, manufactured 230.000 boat fenders during the year, using 1,430,000 feet of extruded vinyl purchased at $1.45 per foot. Production required 4.700 direct labor hours that cost $14.50 per hour. The materials standard was 6 feet of vinyl per fender at a standard cost of $1.60 per foot. The labor standard was 0.025 direct labor hour per fender at a standard cost of $13.50 per hour. Read the requirements Requirement 1. Compute the price and quantity variances for direct materials. Compute the rate and efficiency variances for direct labor. (Enter the variances as positive numbers. Enter currency amounts to the nearest cent and your answers to the nearest whole dollar. Label the variances as favorable (F) or unfavorable (U). Abbreviations used: DM = Direct materials, DL = Direct labor.) Begin with the variances for direct materials. First, determine the formula for the direct materials price variance, then compute the price variance for direct materials. (Assume that the quantity of materials purchased is equal to the quantity of materials used.) (3) ) = DM price variance Determine the formula for the direct materials quantity variance, then compute the quantity variance for direct materials. (5) (6) (7) J) = DM quantity variance Next, compute the variances for direct labor. First, determine the formula for the rate variance, then compute the rate variance for direct labor. (0) (10) (11) -| C ) = DL rate variance ) = C (12) Determine the formula for direct labor the efficiency variance, then compute the efficiency variance for direct labor. (15) ) = ) = DL efficiency variance ||(16) Requirement 2. Does the pattern of variances suggest that the company's managers have been making trade-offs? Explain. The (17) direct materials price variance combined with the (18) direct materials quantity variance suggests that managers may have used (19) - materials. The net effect is (20) The (21) direct labor rate variance combined with the (22) - direct labor efficiency variance suggests that managers may have used (23) - _ workers who performed more efficiently. The net effect is (24) 1: Requirements 1. Compute the price and quantity variances for direct materials. Compute the rate and efficiency variances for direct labor. 2. Does the pattern of variances suggest that the company's managers have been making trade-offs? Explain. (2) O (3) O (4) O (1) O O Actual hours Actual price Actual quantity purchased Standard hours allowed Standard price Standard quantity allowed Actual hours Actual price Actual quantity purchased O Standard hours allowed O Standard price O Standard quantity allowed Actual hours Actual price Actual quantity purchased Standard hours allowed Standard price Standard quantity allowed OF (5) O Actual hours Actual price Actual quantity used O Standard hours allowed Standard price O Standard quantity allowed (6) O O Actual hours O Actual price Actual quantity used Standard hours allowed O Standard price Standard quantity allowed (7) O Actual hours Actual price O Actual quantity used Standard hours allowed O Standard price Standard quantity allowed (8) O OF OU Standard hours allowed O Standard rate O Standard hours allowed Standard rate O Standard hours allowed Standard rate (12) O OF (9) O Actual hours Actual quantity purchased O Actual rate (10) O O Actual hours O Actual quantity purchased O Actual rate (11) O O Actual hours Actual quantity purchased O Actual rate O Standard hours allowed O Standard rate Standard hours allowed Standard rate (16) O O Standard hours allowed Standard rate (17) O favorable O unfavorable O (13) O O Actual hours O Actual quantity purchased O Actual rate (14) O O Actual hours Actual quantity purchased O Actual rate (15) O O Actual hours O Actual quantity purchased O Actual rate (18) O (19) O (20) O (23) O (24) O favorable unfavorable higher-quality lower-quality favorable unfavorable (21) O favorable unfavorable (22) O O favorable unfavorable higher-paid lower-paid favorable unfavorable
