French Company manufactures a line of upholstered chairs, and has given you the following information:

Standards per chair

Direct materials 2 square yards of material at $10 per square yard

Direct manufacturing labor .5 hour of labor at $20 per hour

The following data were compiled regarding actual performance:

Actual chairs produced 20,000 chairs

Square yards of material purchased and used 37,000 square yards

Purchase price per square yard $10.20

Direct manufacturing labor costs $176,400

Actual labor hours 9,000

Labor price per hour $19.60

1 - Show computations for the direct material and direct labor variances. Give a plausible explanation of why each variance may have occurred.

2 - Suppose 60,000 square yards of material were purchased (at $10.20 per square yard), even though only 37,000 square yards were used. Compute the direct material variances using this information.