,

Betty May Inc. designs and manufactures T-shirts. It sells its T-shirts to brand-name clothes retailers in lots of one dozen.BettyMay's

May 2013 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 T-shirts:
Direct materials	12 meters at $1.70 per meter = $20.40
Direct manufacturing labor	1.9 hours at $8.50 per hour = $16.15
Actual Results
Number of T-shirt lots sold	450
Total Direct Inputs:
Direct materials	5,940 meters at $1.95 per meter = $11,583.00
Direct manufacturing labor	810 hours at $8.60 per hour = $6,966.00

BettyMay 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 2013.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 2013.What is the total flexibledashbudget variance for both inputs (direct materials and direct manufacturing labor) combined? What percentage is this variance of the total cost of direct materials and direct manufacturing labor in the flexible budget?
2.	BettyBetty Smith, the CEO, is concerned about the input variances. But she likes the quality and feel of the new material and agrees to use it for one more year. In May 2014 BettyMay again produces 450 lots of T-shirts. Relative to May 2013,2% less direct material is used, direct material price is down 5%, and 2% less direct manufacturing labor is used. Labor price has remained the same as in May 2013.Calculate the direct materials and direct manufacturing labor price and efficiency variances in May 2014. What is the totalflexibledashbudget variance for both inputs (direct materials and direct manufacturing labor) combined? What percentage is this variance of the total cost of direct materials and direct manufacturing labor in the flexible budget?
3.	Comment on the May 2014 results. Would you continue the "experiment" of using the new material?

Requirement 1. Calculate the direct materials and direct manufacturing labor price and efficiency variances in May 2013.

What is the total flexible-budget variance for both inputs (direct materials and direct manufacturing labor) combined? What percentage is this variance of the total cost of direct materials and direct manufacturing labor in the flexible budget?

Begin by calculating the direct materials and direct manufacturing labor price and efficiency variances in May 2013.

Complete the actual results, price variance, and cost columns, then the efficiency variance and flexible budget columns. Label each variance as favorable or unfavorable. (Round all answers to the nearest cent.)

	Actual	Price		Actual Input Qty x
May 2013	Results	Variance		Budgeted Price
Units
Direct materials
Direct labor
Total variance