Dwyer,Inc. is a privately held furniture manufacturer. For August 2014, Dwyer had the following standards for one of itsproducts, a wicker chair:

	Standards per Chair
Direct materials	3 square yards of input at	$5.80	per square yard
Direct manufacturing labor	0.5 hour of input at	$10.50		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, $10,165; actual hours ofinput, 950; labor price per hour, $10.70.

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.

		x		=	Actual cost
Direct materials		x		=

Next we will calculate the actual input at the budgeted price.

	Actual input	x	Budgeted price	=	Cost
Direct materials		x		=
Direct manufacturing labor		x		=

Determine the formula and calculate the costs for the flexible budget.

		x		=	Flexible budget cost
Direct materials		x		=
Direct manufacturing labor		x		=

Now compute the price and efficiency variances for direct materials and direct manufacturing labor. Label each variance as favorable (F) or unfavorable (U).

	Price		Efficiency
	variances		variances
Direct materials
Direct manufacturing labor