Question
Dankel Inc. is a privately held furniture manufacturer. For August 2020 , Dankel had the following standards for one of its products, a wicker chair:
Dankel Inc. is a privately held furniture manufacturer. For August 2020 , Dankel had the following standards for one of its products, a wicker chair: LOADING...(Click the icon to view the standards per chair.)
The following data were compiled regarding actual performance: actual output units (chairs) produced, ; 2600 square yards of input purchased and used,4800 ; price per square yard, ; $6.10 direct manufacturing labor costs, ;$10,450 actual hours of input, ; 950 labor price per hour,$11.00
1. | Show computations of price and efficiency variances for direct materials and direct manufacturing labor. Give a plausible explanation of why each variance occurred. |
2. | Suppose 7,200 square yards of materials were purchased (at$6.10 per square yard), even though only4,800 square yards were used. Suppose further that variances are identified at their most timely control point; accordingly, direct materials price variances are isolated and traced at the time of purchase to the purchasing department rather than to the production department. Compute the price and efficiency variances under this approach. |
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