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Question - Calculating materials and labor variances
Great Fender, which uses a standard cost accounting system, manufactured 20,000 boat fenders during the year, using 144,000 feet of extruded vinyl purchased at $1.05 per square foot. Production required 420 direct labor hours that cost $13.50 per hour. The materials standard was seven feet of vinyl per fender, at a standard cost of $1.10 per square foot. The labor standard was 0.025 direct labor hour per fender, at a standard price of $12.50 per hour.
Requirement - Compute the price and efficiency variances for direct materials and direct labor. Does the pattern of variances suggest Great Fender's managers have been making trade-offs? Explain.
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