Premium, Inc. produced 1,000 units of the company's product in 2018. The standard quantity of direct materials was three yards of cloth per unit at a standard cost of $1.20 per yard The accounting records showed that 2,000 yards of cloth were used and the company paid $1 25 por yard Standard time was two direct labor hours per unit at a standard rate of $10.50 per direct labor hour Employees worked 1.400 hours and were paid $10.00 per hour Read the requrements Requirement 1. What are the benefits of setting cost standards? Standard costing helps managers do the following Sot to get levels of performance for Nexible budgets Set sales prices of products and services Identity performance standards Increase production levels odules Tools > the direct materials officiency variance well as the direct labor cost and efficiency variances pute the cost vanances for direct matonats and direct labor and identify whether each variance is al cost A actualquantity, Folfixed overhead, SC standard cost SQ standard quantity) Create now products Decrease accounting costs Develop more efficient production me Identity performance standards increase production levels Increase sales volume Prepare the master budget Set sales prices of products and services Sot target lovels of performance Boble budgets be direct materials and direct labor and sentify whether each variance is favorable (F) or unfavorable and then continue to the next question Requirement 2. Calculate the direct materials cost variance and the direct materials efficiency variance as well as the direct labor cost and efficiency variances Begin with the cost variances Select the required for compute the cost yarances for det materials and detector and identify whether each variance is favorable (F) or unfavorable (U) (Abbreviations used AC - actual cost, AQ = actual quantity, FOH = fored overhead, SC = standard cost, SQ = standard quantity) Formula Variance Direct materials cost variance Direct labor cost variance Select the required formulas, compute the efficiency varices for de (U) (Abbreviations used AC actual cost, AQactual quantity, FOH materials and dred labor and identuy whothorach variance is favorable (F) or unfavorable fond overhead, SC standard cost SQ = standard quantity) Formula Variance Direct materials officiency variance Direct labor efficiency variance