Habu & Company manufactures flower vases. It uses its standard costing system when developing its flexible-budget amounts. In September 2019, Habu produced 2,000 finished units. The following information relates to its two direct manufacturing cost categories: direct materials and direct manufacturing labor.

Direct materials used were 4,400 kilograms (kg). The standard direct materials input allowed for one output unit is 2 kilograms at $15 per kilogram. Habu purchased 5,000 kilograms of materials at $16.50 per kilogram, a total of $82,500. This Problem illustrates how to calculate direct materials variances when the quantity of materials purchased in a period differs from the quantity of materials used in that period.

Actual direct manufacturing labor-hours were 3,250, at a total cost of $66,300. Standard manufacturing labor time allowed is 1.5 hours per output unit, and the standard direct manufacturing labor cost is $20 per hour.

Requirement:

Calculate the direct materials price variance and efficiency variance and the direct manufacturing labor price variance and efficiency variance. Base the direct materials price variance on a flexible budget for actual quantity purchased, but base the direct materials efficiency variance on a flexible budget for actual quantity used.

IMPORTANT:

Offer your managerial insights (CRITICAL ANALYSIS)