Great Guard, which used a standard cost accounting system, manufactured 220,000 boat fenders during the year, using 1,370,000 feet of extruded vinyl purchased at $1.50 per foot. Production required 4,100 direct labor hours that cost $17.00 per hour. The materials standard was 6 feet of vinyl per fender at a standard cost of $1.60 per foot. The labor standard was 0.023 direct labor hour per fender at a standard cost of $15.50 per hour. Requirements - 1. Compute the price and quantity variances for direct materials. Compute the rate and efficiency variances for direct labor. 2. Does the pattern of variances suggest that the company's managers have been making trade-offs? Explain. 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.) Actual price Standard price Actual quantity purchased ( x( $ ) = DM price variance ) = $ F Determine the formula for the direct materials quantity variance, then compute the quantity variance for direct materials Standard price Actual quantity used Standard quantity allowed DM quantity variance x U Next, compute the variances for direct labor. First, determine the formula for the rate variance, then compute the rate variance for direct labor. Actual hours x Actual rate Standard rate DL rate variance x $ U Determine the formula for direct labor the efficiency variance, then compute the efficiency variance for direct labor. Standard rate Actual hours Standard hours allowed = DL efficiency variance $ ) = $ F Requirement 2. Does the pattern of suggest that the company's managers have een making trade-offs? Explain. The favorable direct materials price variance combined with the unfavorable direct materials quantity variance suggests that managers may have used lower-quality materials. The net effect is unfavorable The unfavorable direct labor rate variance combined with the favorable direct labor efficiency variance suggests that managers may have used higher-paid workers who performed more efficiently. The net effect is favorable