Haliburton Mills Inc. is a large producer of men's and women's clothing. The company uses standard costs for all of its products. The standard costs and actual costs for a recent period are given below for one of the company's product lines (per unit of product):

Actual costs: 4,800 units at $28.81 . . . . . . . . . . . . . . . . . . . . . . . . . . . . $138,288
Standard costs: 4,800 units at $29.28 . . . . . . . . . . . . . . . . . . . . . . . . . . . 140,544
Difference in cost-favourable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 2,256
During this period, the company produced 4,800 units of product. A comparison of standard and actual costs for the period on a total cost basis is also given above.
There was no inventory of materials on hand to start the period. During the period,
21,120 metres of materials was purchased and used in production. The denominator level of activity for the period was 6,860 hours.
Required:
1. For direct materials:
a. Compute the price and quantity variances for the period.
b. Prepare journal entries to record all activity relating to direct materials for the period.
2. For direct labour:
a. Compute the rate and efficiency variances.
b. Prepare a journal entry to record the incurrence of direct labour cost for the period.
3. Compute the variable manufacturing overhead spending and efficiency variances.
4. Compute the fixed overhead budget and volume variances.
5. On seeing the $2,256 total cost variance, the company's president stated, "It's obvious that our costs are well under control." Do you agree? Explain.
6. State possible causes of each variance that you have computed.

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Standard Actual Cost Cost Direct materials: $ 1440 Standard: 40 metres at $3.60 per metre.. Actual: 44 metres at $3.35 per metre. ....... $1474 Direct labour: Standard: 16 hours at $450 per hour. Actual: 14 hours at $485 per hour . Variable manufacturing overhead: Standard: 16 hours at $180 per hour... Actual: 14 hours at $215 per hour.. Fixced manufacturing overheadt Standard: 16 hours at $3.00 per hour. Actual: 14 hours at $3.05 per hour Total cost per unit .. 7.20 679 288 3.01 4,80 4.27 $29.28 $28.81