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Superior Guard, which uses a standard cost accounting system, manufactured 210,000 boat fenders during the year, using 1,570,000 m of extruded vinyl purchased at $1.10
Superior Guard, which uses a standard cost accounting system, manufactured 210,000 boat fenders during the year, using 1,570,000 m of extruded vinyl purchased at $1.10 per metre. Production required 4,700 direct labour hours that cost $14.00 per hour. The materials standard was 7 m of vinyl per fender at a standard cost of $1.20 per metre. The labour standard was 0.028 direct labour hour per fender at a standard cost of $13.00 per hour. Compute the price and efficiency variances for direct materials and direct labour. Does the pattern of variances suggest Superior Guard's managers have been making trade-offs? Explain. 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).) ( Actual price per input unit - Standard price per input unit )x Actual quantity of input Price variance DM ( $ 1.10 1.20 ) x 1,570,000 $ 157,000 F DL ( $ 14.00 13.00 ) x 4,700 $ 4,700 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).) Actual quantity of input Standard quantity of input) x Standard price per input unit = Efficiency variance X DM C DL ( x
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