Paynesville Corporation manufactures and sells a preservative used in food and drug manufacturing. The company carries...

 

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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 122,000 liters at a budgeted price of $240 per liter this year. The standard direct cost sheet for one liter of the preservative follows. Direct materials Direct labor (2 pounds @ $15) (0.5 hours @ $46) $30 23 Variable overhead is applied based on direct labor hours. The variable overhead rate is $130 per direct-labor hour. The fixed overhead rate (at the master budget level of activity) is $65 per unit. All non-manufacturing costs are fixed and are budgeted at $2.3 million for the coming year. At the end of the year, the costs analyst reported that the sales activity variance for the year was $732,000 unfavorable. The following is the actual income statement (in thousands of dollars) for the year. Sales revenue Less variable costs $28,138 Direct materials Direct labor Variable overhead 2,998 2,660 7,130 $12,788 $15,350 Total variable costs Contribution margin Less fixed costs Fixed manufacturing overhead Non-manufacturing costs Total fixed costs 1,160 1,340 $ 2,500 $12,850 Operating profit During the year, the company purchased 198,000 pounds of material and employed 51,400 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. 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 122,000 liters at a budgeted price of $240 per liter this year. The standard direct cost sheet for one liter of the preservative follows. Direct materials Direct labor (2 pounds @ $15) (0.5 hours @ $46) $30 23 Variable overhead is applied based on direct labor hours. The variable overhead rate is $130 per direct-labor hour. The fixed overhead rate (at the master budget level of activity) is $65 per unit. All non-manufacturing costs are fixed and are budgeted at $2.3 million for the coming year. At the end of the year, the costs analyst reported that the sales activity variance for the year was $732,000 unfavorable. The following is the actual income statement (in thousands of dollars) for the year. Sales revenue Less variable costs $28,138 Direct materials Direct labor Variable overhead 2,998 2,660 7,130 $12,788 $15,350 Total variable costs Contribution margin Less fixed costs Fixed manufacturing overhead Non-manufacturing costs Total fixed costs 1,160 1,340 $ 2,500 $12,850 Operating profit During the year, the company purchased 198,000 pounds of material and employed 51,400 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.

Answer rating: 100% (QA)

Data for Material and Labor variance Standard Actual Qty Rate Amount Qty Rate Am... View the full answer