E$-$M:$6-18$ Defining the benefits of setting cost standards and calculating materials and labor variances $($Learning Objectives $2,3)$

Murry, Inc. produced $1,000$ units of the company$$s product in $2024.$ The standard quantity of direct materials was three yards of cloth per unit at a standard cost of $$1\mathrm{.}35$ per yard. The accounting records showed that $2,500$ yards of cloth were used and the company paid $$1\mathrm{.}40$ per yard. Standard time was two direct labor hours per unit at a standard rate of $$12\mathrm{.}00$ per direct labor hour. Employees worked $1,700$ hours and were paid $$10\mathrm{.}50$ per hour.

Requirements

$1.$ What are the benefits of setting cost standards?$2.$ Calculate the direct materials cost variance and the direct materials efficiency variance as well as the direct labor cost and efficiency variances.

$2.$ DM Eff. Var. $$675$ F