Smart Hearing manufactures headphone cases. During September 2018, the company produced and sold 107,000 cases and recorded the following cost data: (Click the icon to view the cost data.) Read the requirements. Requirement 1. Compute the cost and efficiency variances for direct materials and direct labor. 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.) Direct materials cost variance Direct labor cost variance Formula (AC -SC) AQ (AC-SC) AQ Variance Next compute the efficiency variances. Select the required formulas, compute the efficiency 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.) Direct materials efficiency variance Direct labor efficiency variance Formula (AQ - SQ) X AC (AQ-SQ) X AC Variance Requirement 2. For manufacturing overhead, compute the variable overhead cost and efficiency variances and the fixed overhead cost and volume variances. Now compute the variable overhead cost and efficiency variances. Select the required formulas, compute the variable overhead cost and efficiency variances, 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: VOH = variable overhead.) VOH cost variance VOH efficiency variance Formula (AC -SC) AQ (AQ - SQ) x SC Variance Now compute the fixed overhead cost and volume variances. Select the required formulas, compute the fixed overhead cost and volume variances, 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.) Requirement 3. Smart Hearing's management used better quality materials during September. Discuss the trade-off between the two direct material variances. Smart Hearing's management knew that using higher quality materials would result in a(n) unfavorable direct material cost variance unfavorable direct material flexible budget variance They hoped these materials would result in more efficient usage than "standard" materials. The result was an overall Standard Cost Information Quantity Direct Materials Direct Labor Variable Manufacturing Overhead 2 parts Cost $0.16 per part 0.02 hours 9.00 per hour 0.02 hours 11 per hour Fixed Manufacturing Overhead ($29,100 for static budget volume of 97,000 units and 1,940 hours, or $15 per hour) Actual Cost Information Direct Materials Direct Labor Variable Manufacturing Overhead Fixed Manufacturing Overhead (209,000 parts @ $0.21 per part) $ 43,890 (1,640 hours @ $9.15 per hour) 15,006 11,000 28,000