Recently, many new ventures focusing on craft beer have been launched. If the goal is to make a profit, perhaps it would have been better to forget making the beer and instead focus on the hops market. The competition for the available supply of hops has become intense, and this is especially true of the organic varieties. The Cassidy Company uses standards to carefully track its costs. For its Hopalong label, the standard for hops is 20 pounds per barrel, and the standard rate is $12 per pound. In the past period, Cassidy produced 40 barrels of its Hopalong beer using 840 pounds of hops with a current market value of $14.

Compute the rate variance and the efficiency variance and indicate if the variances are favorable or unfavorable.

Be sure to show your work and/or explain how you computed your answer.