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Problem
Superior Inc., produced 1,000 units of the company's product in 2016. The standard quantity of direct materials was three yards of cloth per unit at a standard cost of $1.30 per yard. The accounting records showed that 2,700 yards of cloth were used and the company paid $1.35 per yard. Standard time was two direct labor hours per unit at a standard rate of $10.25 per direct labor hour. Employees worked 1,600 hours and were paid $9.75 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.
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