Fender, which uses a standard cost system, manufactured 20 comma 000 boat fenders during 2018, using 141 comma 000 square feet of extruded vinyl purchased at $ 1.45 per square foot. Production required 420 direct labor hours that cost $ 16.50 per hour. The direct materials standard was seven square feet of vinyl per fender, at a standard cost of $ 1.50 per square foot. The labor standard was 0.027 direct labor hour per fender, at a standard cost of $ 15.50 per hour.
Complete the costs and efficiency variances for Direct materials and direct labor. Does the pattern of variances suggest Fender's managers have been making trade-offs? Explain.

The costs and efficiency variances for Direct materials are 7,050 F and 1500 U and The costs and efficiency variances for direct labor are 1,860 F and 1440 U.

Explanation:

Materials:

Standard Budget Actual

Units $ Total Units $ Total

140000 1.5 210,000 141000 1.45 204,450

Direct Material Variances:

Direct Material Price Variance = Standard Cost for Actual Quantity – Actual Cost

= 210,000 - 204,450

= 5,550 F

Direct Material Price Usage Variance = Actual Quantity at Actual Price - Standard Quantity at Actual price

= 1.45 *( 141,000 - 140,000)

= 7,050 F

Direct Material Efficiency Variance

= Standard Cost of Standard Quantity for Actual Production – Standard Cost of Actual Quantity in Standard Proportion

= 1.5 * (140000 - 141000)

= 1500 U

Labor:

Standard Budget Actual

Hours $ Total Hours $ Total

540 (20000*0.027) 15.5 8,370 420 16.5 6,930

Direct Labor Variances:

Direct Labor Rate Variance = Actual hours worked × Actual rate – Actual hours worked × Standard rate

= 6,930 - 6,510

= 420 F

Direct Labor Usage Variance = Actual hours worked × Standard rate – Standard hours allowed × Standard rate

= 15.5 * (420 - 540)

= 1,860 F

Direct Labor Efficiency Variance = Standard Cost of Standard Quantity for Actual Production – Standard Cost of Actual Quantity in Standard Proportion

= 8,370 - 6,930

= 1440 U

Therefore, The costs and efficiency variances for Direct materials are 7,050 F and 1500 U and The costs and efficiency variances for direct labor are 1,860 F and 1440 U.