JC Penny produces high quality formal dresses. In January 2019 they produced 17,000 dresses. For the month of January, the following standard and actual cost data are available. The normal monthly capacity of the company is 30,000 direct labor hours. All material purchased in January was used in January production.

	Standard per Dress	Actual
Direct materials	5.0 yards @ $8.00 per yard	$660,000 for 80,000 yards
Direct labor	1.5 hours @ $15.00 per hour	$384,000 for 24,000 hours
Overhead	hours @ $5.50 per hour (fixed $3.40; variable $2.10)	$110,000 fixed overhead $52,000 variable overhead

Overhead is applied on the basis of direct labor hours. At normal capacity, budgeted fixed overhead costs are $102,000 per month and budgeted variable overhead costs are $63,000 per month.

Required

1. Which of the variances should be investigated if management considers a variance of more than 5% from standard to be significant?

2. Provide a discussion of the tradeoffs that are most likely to exist between the direct material and direct labor variances.