During the year, Thompson Plastics was in negotiations with the local union over wages. A settlement was finally reached, and the average wage per hour was increased to $32. Production fell to 130,000 units, and 205,000 hours were incurred. Production had been budgeted at 150,000 units. 1.5 hours of labor were expected to produce one unit at a standard labor cost of $48 per unit (based on the new negotiated wage of $32 per hour). Actual labor cost for the period was $6,601,000.

1. Calculate the labor variances at Thompson Plastics.

2. Prepare the journal entry to enter labor costs in Work-in-Process Inventory and set up the rate and efficiency variances for labor.

3. Interpretive Question: Are these variances significant in light of the new wage agreement?