Variance Theory (10 points) We discussed the following six (6) variances: 1. Direct materials price variance 2. Direct materials quantity variance 4.Direct labor efficiency variance 5. Variable overhead rate variance 3. Direct labor rate variance 6. Variable overhead efficiency variance For the following descriptions, state which variance would be the PRIMARY variance (that is, the one you know for sure will happen) affected and whether the variance would be favorable (F) or unfavorable (U). Use the numbers listed above for your answers. I did the first one for you Variance UorF number Materials are purchased at a lower price than the standard price. Union negotiations raised the wages for all factory line workers Standards are not adjusted to reflect this change. Because of a higher than expected increase in the cost of living, the salaries paid to factory supervisors were increased more than expected (yes I know this should probably be a fixed overhead, but let's assume variable) In making curtains, a company actually used 4 yards of material for each curtain. The standard was 4.5 yards In the past, the 10 people employed in the production of product XYZ consisted of 4 senior workers and 6 assistants. During March the company experimented with 3 senior workers and 7 assistants. Note: this one could have two correct answers (but one is more correct than the other IMHO). Name them both. The direct labor efficiency variance for July is favorable. Variable overhead is assigned to Product Z on the basis of direct labor hours. Scheduled maintenance is not taking place. The factory used much more fuel for heating than originally planned because of a winter Because of poor planning for the purchase of materials, the materials were shipped via air instead of the more cost efficient ground trans Poor quality materials were purchased by the purchasing department Note: this one could have two correct answers (but one is more correct than the other IMHO), Name them both. PAGE 4/7