Come up with an example of variances when thinking about budgeting. Think of a company that is manufacturing a product. What kind of materials are required? What is the standard for employee productivity? What are the alternatives for cheaper materials and labor? Provide enough information in your example so that your peers can answer the following questions:

What is the quantity standard and the price standard in your peers example?

What effect, if any, would you expect poor-quality materials to have on direct labor variances?

If variable manufacturing overhead is applied to production on the basis of direct labor-hours and the direct labor efficiency variance is unfavorable, will the variable overhead efficiency variance be favorable or unfavorable? Could it be either?