Paynesville Corporation manufactures and sells a preservativeused in food and drug manufacturing. The company carries noinventories. The master budget calls for the company to manufactureand sell 112,000 liters at a budgeted price of $165 per liter thisyear. The standard direct cost sheet for one liter of thepreservative follows. Direct materials (2 pounds @ $10) $ 20 Directlabor (0.5 hours @ $36) 18 Variable overhead is applied based ondirect labor hours. The variable overhead rate is $80 perdirect-labor hour. The fixed overhead rate (at the master budgetlevel of activity) is $40 per unit. All non-manufacturing costs arefixed and are budgeted at $1.8 million for the coming year. At theend of the year, the costs analyst reported that the sales activityvariance for the year was $522,000 unfavorable. The following isthe actual income statement (in thousands of dollars) for the year.Sales revenue $ 17,738 Less variable costs Direct materials 1,948Direct labor 1,910 Variable overhead 4,030 Total variable costs $7,888 Contribution margin $ 9,850 Less fixed costs Fixedmanufacturing overhead 1,110 Non-manufacturing costs 1,290 Totalfixed costs $ 2,400 Operating profit $ 7,450 During the year, thecompany purchased 188,000 pounds of material and employed 46,400hours of direct labor.
Required: a. Compute the direct material price and efficiencyvariances.
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" forfavorable, or "U" for unfavorable. If there is no effect, do notselect either option.)
