1. What is meant by 'variance'? Why it is important for a company to analyze the causes of variances for its different cost elements? [03] 2. Virtue Company manufactures children's toys. The company had budgeted to produce 1,400 toys during May, but actual production was 1,300 toys. $40.00 The standard costs for one unit of toy are as follows: Direct materials: 5 ounces at $8.00 per pound. Direct labor: 2 hours at $14 per hour Variable overhead: 2 hours at $5 per hour Total standard cost per unit of toy. $28.00 $10.00 $78.00 During May, the following activity was recorded related to the production of the company: a. Materials purchased 7200 ounces at a cost of $25,000. b. At the end of the month, 450 ounces of material remained unused. c. The company employs 2800 direct labor hour at an average rate of $15 per hour. d. Variable manufacturing overhead is assigned to products on the basis of direct labor- hours. Actual variable manufacturing overhead costs during May totaled $12800. Required: a) Materials (price, quantity and total) variances, Labor (rate, efficiency and total) variances and Variable Manufacturing Overhead (rate, efficiency and total) variances. [05] b) Explain the possible causes of these variances.[02]