Great, Inc. produced 1,000 units of the company's product in 2018. The standard quantity of direct materials was three yards of cloth per unit at a standard cost of $1.00 per yard. The accounting records showed that 2,700 yards of cloth were used and the company paid $1.05 per yard. Standard time was two direct labor hours per unit at a standard rate of $10.25 per direct labor hour. Employees worked 1,300 hours and were paid $9.75 per hour. Read the requirements. Requirement 1. What are the benefits of setting cost standards? Standard costing helps managers do the following: Prepare the master budget Set target levels of performance for flexible budgets Identify performance standards Set sales prices of products and services Decrease accounting costs Requirement 2. Calculate the direct materials cost variance and the direct materials efficiency variance as well as the direct labor cost and efficiency variances. Begin with the cost variances. Select the required formulas, compute the cost variances for direct materials and direct labor, and identify whether each variance is favorable (F) or unfavorable (U). (Abbreviations used: AC = actual cost; AQ = actual quantity; FOH = fixed overhead; SC = standard cost; SQ = standard quantity.) Formula Variance Direct materials cost variance = (AC - SC) X AQ U Direct labor cost variance = AC - SC) X AQ FPro Fender. which uses a standard cost system, manufactured 20,000 boat fenders during 2018, using 141,000 square feet of extruded vinyl purchased at $1.40 per square foot. Production required 470 direct labor hours that cost $15.00 per hour. The direct materials standard was seven square feet of vinyl per fender, at a standard cost of $1.45 per square foot. The labor standard was 0.026 direct labor hour per fender, at a standard cost of $14.00 per hour. Read the muirement. Begin with the cost variances. Select the required formulas, compute the cost variances for direct materials and direct labor. and identify whether each variance is favorable (F) or unfavorable (U). (Abbreviations used: AC = actual cost; A0 = actual quantity: FOH = xed overhead: SC = standard cost; SQ = standard quantity.) Formula Variance (AC so) x AQ = F (AC - so) xAQ = u v Direct materials cost variance Direct labor cost variance