Explain what each of the following variances indicates, and discuss what conditions might have caused each variance

Direct material price variance: $1,000 U
Direct material quantity variance: $1,500 F
Direct labor rate variance: $800 F
Direct labor efficiency variance: $300 U

Direct material price variance: $1,000 U An unfavorable variance indicates that the materials used cost $1,000 more than expected. This could be the result of a faulty standard, increases in the market price of the materials, the purchasing agent failing to negotiate a good price, or the result of purchasing superior high quality materials.

Direct material quantity variance: $1,500 F A favorable variance indicates that less material was used than expected. This could be caused by the use of higher quality materials which resulted in less waste or a faulty standard.

Direct labor rate variance: $800 F A favorable variance indicates that the wage rate paid per hour was lower than expected. This could be the result of using less experienced and, therefore, lower-paid employees, an unanticipated decrease in wages for the company due to excess labor availability or other employment market factors, or a faulty standard.

Direct labor efficiency variance: $300 U An unfavorable variance indicates that the actual amount of time worked on the job was more than expected. This could be the result of using less experienced and, therefore, more inefficient employees, or a faulty standard.