Dunn, Inc. is a privately held fumiture manufacturer. For August 2017, Dunn had the following standards for one of its products, a wicker chair (Click the icon to view the standards per chair.) The following data were compiled regarding actual performance actual output units (chairs) produced, 2,000, square yards of input purchased and used, 3,700; price per square yard, $5.40, direct manufacturing labor costs, $9,306, actual hours of input, 940, labor price per hour, $9.90. Read the requirements Requirement 1. Show computations of price and efficiency variances for direct materials and direct manufacturing labor. Give a plausible explanation of why each variance occurred Let's begin by determining the formula used to calculate the actual costs of direct matenals, then enter the amounts in the formula and calculate the cost. Direct materials Requirements Actual input 3,700 Actual price 5.4 - X Actual cost 19,980 Cost 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 6,200 square yards of materials were purchased (at $5.40 per square yard), even though only 3,700 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. Print Done ma Rel Next we will calculate the actual input at the budgeted price. Direct materials Direct manufacturing labor Actual input Print X Budgeted price Cost X Determine the formula and calculate the costs for the flexible budget. Direct materials Direct manufacturing labor (1) (2) = Flexible budget cost X = Now compute the price and efficiency variances for direct materials and direct manufacturing labor. Label each variance as favorable (F) or unfavorable (U) Direct materials Direct manufacturing labor Price variances Efficiency variances (3) (4) (5) (6) Now give a plausible explanation of why each variance occurred. Begin with the direct material variances. The materials price variance: There was an unexpected (7). in materials price per square yard due to (8) competition. The materials efficiency variance The production manager may have employed (9). materials standards were set too (10)- workers or the budgeted The labor price variance: (11). in labor rates due to a (12). The labor efficiency variance (13) efficient workers being employed or the use of (14). quality materials. Requirement 2. Suppose 6,200 square yards of materials were purchased (at $5.40 per square yard), even though only 3,700 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. Begin with recalculating the costs using the information provided for the alternative approach. Actual input X Actual cost Budgeted price Flexible budget cost Purchasing Production Now compute the direct materials price and efficiency variances. Label each variance as favorable (F) or unfavorable (U). Price variance Efficiency Direct materials 1: Data Tahla variance (15) (16) 1 of 2 (1 complete) er For August 2017, Dunn had the following standards for one of its products, a wicker chair: r.) al performance actual output units (chairs) produced, 2,000, square yards of input purchased and used, 3,700; p= of input, 940; labor price per hour, $9.90. efficiency variances for direct materials and direct manufacturing labor. Give a plausible explanation of why each alculate the actual costs of direct materials, then enter the amounts in the formula and calculate the cost. Actual price Data Table dgeted input Direct materials Direct manufacturing labor click Check Answer W Actual cost - X Standards per Chair 2 square yards of input at $ 5.30 per square yard 0.5 hour of input at $ 10.00 per hour Print Done Clear All