Arzu Inc. produces premium protective car covers. The direct materials and direct labour standards for one
car cover are as follows:
Standard Quantity
or Hours
Standard Price
or Rate
Standard
Cost
Direct materials
8.00 metres of cloth
$10 per metre
$80.00
Direct labour
0.40 hours
$18 per hour
$ 7.20
Variable overhead
0.40 hours
$ 7 per hour
$ 2.80
Budgeted fixed overhead cost is $19,100, and the normal production volume is 2,885 car covers. Overhead
is applied on the basis of direct labour-hours.
In September, the following activity was recorded:
\begin{itemize}
\item 21,600 metres of cloth were purchased at a cost of $9.50 per metre.
\item All of the purchased material was used to produce 2,700 car covers.
\item 530 direct labour-hours were recorded at a total labour cost of $9,540.
\end{itemize}
Actual variable overhead cost was $4,500, and fixed overhead cost was $18,550.
Required:
1. Compute all direct materials variances for September. (Indicate the effect of each variance by selecting
"F" for favourable, "U" for unfavourable, and "None" for no effect (i.e., zero variance).)
Direct materials price variance
Direct materials quantity variance
Total direct material cost variance
