Chapter 7 - Flexible Budgets, Direct-Cost Variances, and Management Control - Assignment Material - Problems - Page 283: 7-37(1)

Variances Calculation: a. Wool Price Variance: Actual Wool Cost: \$9,000 Standard Wool Cost (3,500 skeins * \$3.40 per skein): \$11,900 Wool Price Variance: Actual Cost - Standard Cost = \$9,000 - \$11,900 = -\$2,900 (Favorable) b. Wool Efficiency Variance: Actual Wool Usage: 3,500 skeins Standard Wool Usage (200 shawls *13 skeins per shawl): 2,600 skeins Wool Efficiency Variance: Actual Usage - Standard Usage = 3,500 skeins - 2,600 skeins = 900 skeins (Unfavorable) c. Direct Manufacturing Labor Price Variance: Actual Labor Cost: \$5,520 Standard Labor Cost (580 hours * \$9.00 per hour): \$5,220 Labor Price Variance: Actual Cost - Standard Cost = \$5,520 - \$5,220 = \$300 (Unfavorable) d. Direct Manufacturing Labor Efficiency Variance: Actual Labor Hours: 580 hours Standard Labor Hours (200 shawls * 3 hours per shawl): 600 hours Labor Efficiency Variance: Actual Hours - Standard Hours = 580 hours - 600 hours = -20 hours (Favorable)

Variances Calculation: a. Wool Price Variance: Actual Wool Cost: \$9,000 Standard Wool Cost (3,500 skeins * \$3.40 per skein): \$11,900 Wool Price Variance: Actual Cost - Standard Cost = \$9,000 - \$11,900 = -\$2,900 (Favorable) b. Wool Efficiency Variance: Actual Wool Usage: 3,500 skeins Standard Wool Usage (200 shawls *13 skeins per shawl): 2,600 skeins Wool Efficiency Variance: Actual Usage - Standard Usage = 3,500 skeins - 2,600 skeins = 900 skeins (Unfavorable) c. Direct Manufacturing Labor Price Variance: Actual Labor Cost: \$5,520 Standard Labor Cost (580 hours * \$9.00 per hour): \$5,220 Labor Price Variance: Actual Cost - Standard Cost = \$5,520 - \$5,220 = \$300 (Unfavorable) d. Direct Manufacturing Labor Efficiency Variance: Actual Labor Hours: 580 hours Standard Labor Hours (200 shawls * 3 hours per shawl): 600 hours Labor Efficiency Variance: Actual Hours - Standard Hours = 580 hours - 600 hours = -20 hours (Favorable)