Dunn, Inc. is a privately held furniture manufacturer. For August 2014, Dunn had the following standards for one of its products, a wicker chair: Standards per Chair Direct materials Direct manufacturing labor 3 square yards of input at $ 0.5 hour of input at $ 5.90 per square yard 10.30 per hour The following data were compiled regarding actual performance: actual output units (chairs) produced, 2,200; square yards of input purchased and used, 6,300; price per square yard, $6.00; direct manufacturing labor costs, $9,450; actual hours of input, 900; labor price per hour, $10.50. 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 materials, then enter the amounts in the formula and calculate the cost. Direct materials X Next we will calculate the actual input at the budgeted price. Direct materials Direct manufacturing labor Actual input Determine the formula and calculate the costs for the flexible budget. Direct materials Direct manufacturing labor x = Actual cost = Budgeted price = Cost = = Flexible budget cost = II Now compute the price and efficiency variances for direct materials and direct manufacturing labor. Label each variance as favorable (F) or unfavorable (U). Price variances Efficiency variances Direct materials Direct manufacturing labor Now give a plausible explanation of why each variance occurred. Begin with the direct material variances. The materials price variance: The materials efficiency variance: The labor price variance: The labor efficiency variance: There was an unexpected in materials price per square yard due to competition. The production manager may have employed workers or the budgeted materials standards were set too in labor rates due to a efficient workers being employed or the use of quality materials.