Premium Guard, which uses a standard cost accounting system, manufactured 170,000 boat fenders during the year, using 1,070,000 m of extruded vinyl purchased at $1.40 per metre. Production required 4,200 direct labour hours that cost $15.50 per hour. The materials standard was 6m of vinyl per fender at a standard cost of $1.45 per metre. The labour standard was 0.026 direct labour hour per fender at a standard cost of $14.50 per hour. Compute the price and efficiency variances for direct materials and direct labour. Does the pattern of variances suggest Premium Guard's managers have been making trade-offs? Explain. unit F Begin by determining the formula for the price variance, then compute the price variances for direct materials (DM) and direct labour (DL). (Enter the results as positive numbers. Label each variance as favourable (F) or unfavourable (U).) Standard price per input Price (Actual price per input unit ) x Actual quantity of input = variance DM ( 1.40 1.45 ) 1,070,000 = $ 53,500 DL 15.50 14.50 ) 4,200 = $ 4,200 U Next, determine the formula for the efficiency variance, then compute the efficiency variances for direct materials (DM) and direct labour (DL). (Enter the results as positive numbers. Label each variance as favourable (F) or unfavourable (U).) Efficiency Actual quantity of input Standard quantity of input )x Standard price per input unit = variance 1,070,000 1,020,000 1.45 = $ 72,500 DL ( 4,200 4,420 14.50 = $ 3,190 F DM )* $ ) x $ The unfavourable direct materials price variance combined with the favourable direct materials efficiency variance suggests that managers may have used higher-quality materials. The net effect is favourable