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You are hired as a consultant for P. Maholmes Corp., which uses a standard absorption costing system that applies variable and fixed overhead on the basis of direct labor hours. Per your request, they have provided you with the following information. For direct materials, the standard quantity is 5 pounds/unit, the standard price is $4/pound, and the price variance for materials is isolated as soon as possible. Additionally, the standard price for direct labor price is $7/hr, and the standard price for variable factory overhead is $5/hr. The total (all product cost elements combined) flexible budget amount for 60,000 units (their denominator level) is $3,060,000, of which $600,000 is variable factory overhead. Finally, the system provided the following additional information: Direct material efficiency variance is $280,000 U. Variable factory overhead efficiency variance is $100,000 F. Actual direct material used (requisitioned) is 320,000 lbs. Actual direct material purchased is 360,000 lbs at $3.75/lb. Actual direct labor costs are $650,000. Actual direct labor hours worked are 80,000 hours. Total actual factory overhead is $800,000. Actual variable factory overhead is $510,000 Actual production was 50,000 units. Calculate the following:

1. Direct material price variance is:

2. Direct labor efficiency variance is:

3. Variable overhead spending variance is:

4. Fixed factory overhead flexible budget variance is:

5. The production volume variance is

6. Explain to the controller, Mr. Andy Reid, the nature and cause of the production volume variance in a standard absorption costing system. What benefit is being captured from such a system that induces this potential variance, and why is this variance not an issue for variable factory overhead?

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