Question

DawsonDawson​,

Inc. is a privately held furniture manufacturer. For August

20142014​,

DawsonDawson

had the following standards for one of its​ products, a wicker​ chair:

	Standards per Chair
Direct materials	3 square yards of input at	$5.70	per square yard
Direct manufacturing labor	0.5 hour of input at	$10.60		per hour

The following data were compiled regarding actual

performance​:

actual output units​ (chairs) produced,

2 comma 9002,900​;

square yards of input purchased and​ used,

8 comma 3008,300​;

price per square​ yard,

$ 5.80$5.80​;

direct manufacturing labor​ costs,

$ 10 comma 296$10,296​;

actual hours of​ input,

990990​;

labor price per​ hour,

$ 10.40$10.40.

Read the requirements

LOADING...

.

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.

Actual input

x

Actual price

=

Actual cost

Direct materials

x

=

Next we will calculate the actual input at the budgeted price.

	Actual input	x	Budgeted price	=	Cost
Direct materials		x		=
Direct manufacturing labor		x		=

Determine the formula and calculate the costs for the flexible budget.

		x		=	Flexible budget cost
Direct materials		x		=
Direct manufacturing labor		x		=

Now compute the price and efficiency variances for direct materials and direct manufacturing labor. Label each variance as favorable​ (F) or unfavorable​ (U).

	Price		Efficiency
	variances		variances
Direct materials
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 ▼ decrease increase in materials price per square yard due to ▼ decreased increased competition.
The materials efficiency​ variance:	The production manager may have employed ▼ higher-skilled lower-skilled workers or the budgeted materials standards were set too ▼ loosely strictly .

The labor price​ variance:	▼ An increase A reduction in labor rates due to a ▼ booming economy recession .
The labor efficiency​ variance:	▼ Less More efficient workers being employed or the use of ▼ higher lower quality materials.

Choose from any list or enter any number in the input fields and then continue to the next question.

Answer 1

	Actual price	x	Actual input	=	Actual cost
Direct materials	5.8	x	8,300	=	$48,140.00
Direct manufacturing labor	10.4	x	990	=	$10,296.00
	Actual input	x	Budgeted price	=	Cost
Direct materials	8300	x	$5.70	=	$47,310.00
Direct manufacturing labor	990	x	$10.60	=	$10,494.00
	Budgeted input for actual output	x	Budgeted price	=	Flexible budget cost
Direct materials (2900X3)	8700	x	$5.70	=	$49,590.00
Direct manufacturing labor (2900*0.5)	1450	x	$10.60	=	$15,370.00
	Price variances		Efficiency variances
Direct materials	830	U	2280	F
	(48140-47310')		(47310-49590)
Direct manufacturing labor	198	F	4876	F
	(10296-10494)		(10494-15370)

Ther Material price Variance :

There was Unexpected increase in material Price per Square yard due to decrease competition

The Material Efficeincy VAriance:_

The Production Manager manager ma have employed higher skilled worker of the budgeted material standard were set too loosely

The Labor Price Rate Variance:-

An Reduction n labor rates due to recession

The labor Efficiency Variance

More Efficeint workers beng deployed or the use of higher quality material