Limerick Fare is a furniture manufacturer in Dublin, Ireland. For August 2020, Limerick had the following standards for one of its products, a coffee table:

The following data were compiled regarding actual performance: actual output units (tables) produced, 2,000; square meters of input purchased and used, 3,700; price per square meter, €5.10; direct manufacturing labor costs, €8,820; actual hours of input, 900; labor price per hour, €9.80.

Required

1. Show computations of price and efficiency variances for direct materials and direct manufacturing labor. Give a plausible explanation of why each variance occurred.
2. Suppose 6,000 square meters of materials were purchased (at €5.10 per square meter), even though only 3,700 square meters were used. Suppose further that variances are identified at their most timely control point; accordingly, direct materials price variances are isolated and traced at the time of purchase to the purchasing department rather than to the production department. Compute the price and efficiency variances under this approach.

Transcribed Image Text:

Direct materials Direct manufacturing labor Standards per Table 2 square meters of input at €5 per square meter 0.5 hour of input at €10 per hour