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Go ahead and complete the table below to identify all of the amounts we will need to determine the cost and efficiency variances for materials and labor. (Enter all currency amounts to the nearest cent.)

	Direct		Direct
	Materials		Labor
Actual cost (AC)	$	/ sq. ft.	$	/ hr.
Standard cost (SC)	$	/ sq. ft.	$	/ hr.
Actual quantity (AQ)		sq. ft.		hrs
Standard quantity (SQ)		sq. ft.		hrs

Now we can determine the cost variances for direct materials and direct labor and identify whether each variance is favorable (F) or unfavorable (U). For costs, a variance is favorable when actual costs were less than the standard and unfavorable when actual costs exceeded the standard.

		Formula								Variance
Direct materials cost variance	=	(AC - SC) x AQ	= (	$	-	$	) x		=	$	F
Direct labor cost variance	=	(AC - SC) x AQ	= (	$	-	$	) x		=	$	U

Determine the efficiency variances for direct materials and direct labor and identify whether each variance is favorable (F) or unfavorable (U). In regards to efficiency, a variance is favorable when the actual quantity was less than the standard and unfavorable when the actual quantity exceeded the standard.

		Formula								Variance
Direct materials efficiency variance	=	(AQ - SQ) x SC	= (		-		) x	$	=	$	U
Direct labor efficiency variance	=	(AQ - SQ) x SC	= (		-		) x	$	=	$	F

Does the pattern of variances suggest

Great

Great Fender's managers have been making trade-offs? Explain.

Cost Variance
Direct materials	$	F
Direct labor	$	U

Efficiency Variance
Direct materials	$	U
Direct labor	$	F

Carefully review the result of this analysis and consider the meaning of cost and efficiency variances. What does the favorable direct material cost variance and unfavorable direct materials efficiency variance suggest about quality of direct materials that were being used? What does the unfavorable direct labor cost variance and favorable direct labor efficiency variance suggest about quality of labor that was being used?

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E23-19 (similar to) Question Help Grand Fender, which uses a standard cost system, manufactured 20,000 boat fenders during 2018, using 145,000 square feet of extruded vinyl purchased at $1.10 per square foot. Production required 420 direct labor hours that cost $12.00 per hour. The direct materials standard was seven square feet of vinyl per fender, at a standard cost of $1.15 per square foot. The labor standard was 0.023 direct labor hour per fender, at a standard cost of $11.00 per hour. Read the requirement. 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 Direct labor cost variance II i Requirement Compute the cost and efficiency variances for direct materials and direct labor. Does the pattern of variances suggest Grand Fender's managers have been making trade-offs? Explain. Print Done