Calculate and explain direct material and direct labor variances (Learning Objectives 1, 2, & 3)

Athena Fabrics manufactures a specialty monogrammed blanket. The following are the cost and labor standards for this blanket:

Direct material (fabric): 2.0 yards per blanket at $7.50 per yard

Direct labor: 0.5 direct labor hours per blanket at $16.00 per hour

Actual results from last months production of 1,900 blankets are as follows:

Actual cost of 4,940 yards of direct material (fabric) purchased: $35,074

Actual yards of direct material (fabric) used: 4,490

Actual wages for 1,090 direct labor hours worked: $16,568

Requirements

1. What is the standard direct material cost for one blanket?

2. What is the actual cost per yard of fabric purchased?

3. Calculate the direct material price and quantity variances.

4. What is the standard direct labor cost for one blanket?

5. What is the actual direct labor cost per hour?

6. Calculate the direct labor rate and efficiency variances.

7. Analyze each variance and speculate as to what may have caused that variance.

8. Look at all four variances together (the big picture). How might they all be related? What variance is very likely to have caused the other variances?