Response to the following problem:
Premium, Inc., produced 1,000 units of the company's product in 2012. The standard quantity of materials was three yards of cloth per unit at a standard price of $1.05 per yard. The accounting records showed that 2,600 yards of cloth were used and the company paid $1.10 per yard. Standard time was two direct labor hours per unit at a standard rate of $9.75 per direct labor hour. Employees worked 1,400 hours and were paid $9.25 per hour.
Requirements
1. What are the benefits of setting cost standards?
2. Calculate the materials price variance and the materials efficiency variance, as well as the labor price and efficiency variances.