Required: a. Compute the direct material price and efficiency variances. b. Compute the direct labor price and efficiency variances. c. Compute the variable overhead price and efficiency variances. (For all requirements, enter your answers in whole dollars. Indicate the effect of each variance by selecting "F" for favorable, or "U" for unfavorable. If there is no effect, do not select either option.)
Paynesville Corporation manufactures and sells a preservative used in food and drug manufacturing. The company carries no inventories. The
| Direct materials | (2 pounds @ $4) | $ | 8 | |
| Direct labor | (0.5 hours @ $24) | 12 | ||
Variable overhead is applied based on direct labor hours. The variable overhead rate is $20 per direct-labor hour. The fixed overhead rate (at the master budget level of activity) is $10 per unit. All non-
At the end of the year, the costs analyst reported that the sales activity variance for the year was $270,000 unfavorable.
The following is the actual income statement (in thousands of dollars) for the year.
| Sales revenue | $ | 7,238 | |
| Less variable costs | |||
| Direct materials | 748 | ||
| Direct labor | 1,010 | ||
| Variable overhead | 930 | ||
| Total variable costs | $ | 2,688 | |
| Contribution margin | $ | 4,550 | |
| Less fixed costs | |||
| Fixed manufacturing overhead | 1,050 | ||
| Non-manufacturing costs | 1,230 | ||
| Total fixed costs | $ | 2,280 | |
| Operating profit | $ | 2,270 | |
During the year, the company purchased 176,000 pounds of material and employed 40,400 hours of direct labor.
Required:
a. Compute the direct material price and efficiency variances.
b. Compute the direct labor price and efficiency variances.
c. Compute the variable overhead price and efficiency variances.
(For all requirements, enter your answers in whole dollars. Indicate the effect of each variance by selecting "F" for favorable, or "U" for unfavorable. If there is no effect, do not select either option.)
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