You decide to look at your sales for a typical day. You find that the parlor used 390 pounds of ice cream and 72 hours of direct labor to produce and sell 2,000 shakes. The standard quantity allowed for a shake is 0.2 pound of ice cream and 0.03 hour of direct labor. The standard costs are $1.50 per pound for ice cream and $8 per hour for labor.
1. Compute the efficiency variances for direct labor and direct materials.
2. Provide likely explanations for the variances. Do you have reason to be concerned about your performance evaluation? Explain.