Highland Shortbread, Ltd., of Aberdeen, Scotland, produces a single product and uses a standard cost system to help in the control of costs. Overhead is applied to production on a basis of machine-hours. Engineering standards specify that each unit of output should take two machine hours. According to the companys budget, the following overhead costs would be incurred at an activity level of 9,000 units of output:

Variable overhead costs.. $ 36,000

Fixed overhead costs . 72,000

Total estimated overhead costs $108,000

In addition, the following information is available:

Standard Quantity Standard Price or Rate

Direct materials 1.5 pounds $6 per pound

Direct labor 0.6 hours $12 per hour

During the month, the following operating results were recorded:

Units of output produced 8,000

Actual machine-hours worked .. 15,000

Actual variable overhead cost incurred $38,000

Actual fixed overhead cost incurred $70,000

A total of 13,000 pounds of direct materials were purchased at a cost of $91,000. There was no beginning inventory of materials on hand to start the month; at the end of the month, 2,000 pounds of direct materials remained in the RM store unused. The company employs 30 persons to work on the production. During the month, each worked an average of 155 hours at an average rate of $12.50 per hour.

1. Compute the Price and Efficiency variances for DM and DL.