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Paynesville Corporation manufactures and sells a preservative used in food and drug manufacturing. The company carries no inventories. The master budget calls for the company to manufacture and sell 106,000 liters at a budgeted price of $120 per liter this year. The standard direct cost sheet for one liter of the preservative follows. Direct materials Direct labor (2 pounds $7) (0.5 hours @ $30) $10 15 Variable overhead is applied based on direct labor hours. The variable overhead rate is $50 per direct-labor hour. The fixed overhead rate (at the master budget level of activity) is $25 per unit. All non-manufacturing costs are fixed and are budgeted at $1.5 million for the coming year At the end of the year, the costs analyst reported that the sales activity variance for the year was $396,000 unfavorable, The following is the actual income statement (in thousands of dollars) for the year. $12,218 Sales revenue Less variable costs Direct materials Direct labor Variable overhead Total variable costs Contribution margin Less fixed costs Fixed manufacturing overhead Non-manufacturing costs Total fixed costs Operating profit 1,318 1,040 960 $ 3,318 $ 8,900 1,080 1,260 $ 2,340 $ 6,560 Required: Prepare a profit variance analysis (Enter your answers in thousands of 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) Sales Price Variance Flexible Budget Sales Activity Variance PAYNESVILLE CORPORATION Prof Variance Analysis Manufacturing Non-Manufacturing Actual Variances Variances 12 218 13181 10401 960 Sales revenue 5 3 3181 R600 Materials Direct labor Variable overhead Total Variable costs Contribution margin Flored costs Manufacturing Nam turing Total foed costs Operating profits 10801 5 2 0 er your answers in thousands of dollars. Indicate the effect of each variance by selecting "F" If there is no effect, do not select either option.) Sales Price Variance Flexible Budget Sales Activity Variance Master Budget PAYNESVILLE CORPORATION Profit Variance Analysis Actual Manufacturing Non-Manufacturing Variances Variances $ 12,218 13181 1,040 960 $ 3,318 $ 8,900 1,080 1.260 2.340 6,560 S $

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