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Great Guard, which used a standard cost accounting system, manufactured 180,000 boat fenders during the year, using 1,540,000 feet of extruded vinyl purchased at $1.40
Great Guard, which used a standard cost accounting system, manufactured 180,000 boat fenders during the year, using 1,540,000 feet of extruded vinyl purchased at $1.40 per foot. Production required 4,400 direct labor hours that cost $17.00 per hour. The materials standard was 8 feet of vinyl per fender at a standard cost of $1.50 per foot. The labor standard was 0.027 direct labor hour per fender at a standard cost of $15.50 per hour. Read the requirements. Requirement 1. Compute the price and quantity variances for direct materials. Compute the rate and efficiency variances for direct labor. (Enter the variances as positive numbers. Enter currency amounts to the nearest cent and your answers to the nearest whole dollar. Label the variances as favorable (F) or unfavorable (U). Abbreviations used: DM = Direct materials, DL = Direct labor.) Begin with the variances for direct materials. First, determine the formula for the direct materials price variance, then compute the price variance for direct materials. (Assume that the quantity of materials purchased is equal to the quantity of materials used.) DM price variance XO = 1. Compute the price and quantity variances for direct materials. Compute the rate and efficiency variances for direct labor. Does the pattern of variances suggest that the company's managers have been making trade-offs? Explain. 2
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