The following data were compiled regarding actual performance: actual output units (chairs) produced, 2,800; square yards of input purchased and used, 5,300 ; price per square yard, $5.70; direct manufacturing labor costs, $9,696; actual hours of input, 960 ; labor price per hour, $10.10. Read the requirements. 1. Show computations of price and efficiency variances for direct materials and direct manufacturing labor. Give a plausible explanation of why each variance occurred. 2. Suppose 7,600 square yards of materials were purchased (at $5.70 per square yard), even though only 5,300 square yards were used. Suppose further that variances are identified at their most timely control point; accordingly, direct materials price variances are isolated and traced at the time of purchase to the purchasing department rather than to the production department. Compute the price and efficiency variances under this approach. Requirement 1. Show computations of price and efficiency variances for direct materials and direct manufacturing labor. Give a plausible explanation of why each variance occurred. Let's begin by determining the formula used to calculate the actual costs of direct materials, then enter the amounts in the formula and calculate the cost. Next we will calculate the actual input at the budgeted price. Next we will calculate the actual input at the budgeted price. \begin{tabular}{l|l} \multicolumn{1}{c}{} & Actual input \\ Direct materials & \\ Direct manufacturing labor \end{tabular} x = Determine the formula and calculate the costs for the flexible budget. Direct materials \begin{tabular}{|l|l|} \hline & x \\ & \\ \hline \end{tabular} Direct manufacturing labor Now give a plausible explanation of why each variance occurred. Begin with the direct material variances. The materials price variance: There was an unexpected in materials price per square yard due to competition. The materials efficiency variance: The production manager may have employed workers or the budgeted materials standards were set too The labor price variance: in labor rates due to a Now give a plausible explanation of why each variance occurred. Begin with the direct material variances. The materials price variance: There was an unexpected in materials price per square yard due to competition. The materials efficiency variance: The production manager may have employed workers or the budgeted materials standards were set too The labor price variance: in labor rates due to a The labor efficiency variance: efficient workers being employed or the use of quality materials
