Perfect Pet Collar Company makes custom leather pet collars. The company expects each collar to require 1.5 feet of leather and predicts leather will cost $2.50 per foot. Suppose Perfect Pet made 60 collars during February. For these 60 collars, the company actually averaged 1.75 feet of leather per collar and paid $2.00 per foot.
1. Compute the standard direct materials cost per unit.
2. Without performing any calculations, determine whether the direct materials price variance will be favorable or unfavorable.
3. Without performing any calculations, determine whether the direct materials quantity variance will be favorable or unfavorable.
4. Give a potential explanation for this pattern of variances.
5. Where would you begin to investigate the variances?
6. Calculate the direct materials price and quantity variances.