SoundSmart manufactures headphone cases. During September 2018, the company produced and sold 107,000 cases and recorded the following cost data

Standard Cost Information
	Quantity		Cost
Direct Materials	2	parts	$0.17	per part
Direct Labor	0.02	hours	9.00	per hour
Variable Manufacturing Overhead	0.02	hours	9.00	per hour
Fixed Manufacturing Overhead ($32,980 for static budget volume
of 97,000 units and 1,940 hours, or $17 per hour)

Actual Cost Information
Direct Materials	(212,000 parts @		$0.22	per part)	$46,640
Direct Labor	(1,640 hours @		$9.10	per hour)	14,924
Variable Manufacturing Overhead					10,000
Fixed Manufacturing Overhead					28,000

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.)

		Formula		Variance
Direct materials cost variance	=		=
Direct labor cost 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 = actualcost; AQ = actual quantity; FOH = fixed overhead; SC = standard cost; SQ = standard quantity.)

		Formula		Variance
Direct materials efficiency variance	=		=
Direct labor efficiency 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.)

		Formula		Variance
VOH cost variance	=		=
VOH efficiency 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.)

		Formula		Variance
FOH cost variance	=		=
FOH volume variance	=		=

Requirement 3. SoundSmart's management used better quality materials during September. Discuss the trade-off between the two direct material variances. SoundSmart's management knew that using higher quality materials would result in a(n)

favorable direct material cost variance

favorable direct material efficiency variance

unfavorable direct material cost variance

unfavorable direct material efficiency variance

. They hoped these materials would result in more efficient usage than "standard" materials. The result was an overall

favorable direct material cost variance

favorable direct material flexible budget variance

unfavorable direct labor flexible budget variance

unfavorable direct material flexible budget variance

.