ABC Road Maps produces road maps. ABC uses a standard cost system to control manufacturing costs.

The following standard cost unit information is based on the static budget volume of 120,000 road maps per month:

Direct materials (40 sq. yards @ $0.02 per sq. yard) $0.80

Direct labor (0.10 hours @ $15.00 per hour) 1.50

Manufacturing overhead:

Variable (0.10 hours @ $3.00 per hour) 0.30

Fixed (0.10 hours @ $8.00 per hour) 0.80 1.10

Total cost per map $3.40

Actual cost and production volume information is as follows:

Actual production was 118,000 maps.

Actual direct materials usage was 4,838,000 square yards; 5,000,000 square yards were purchased at an actual cost of $0.016 per square yard.

Actual direct labor usage of 11,600 hours at a total cost of $140,360.

Total actual overhead was $126,000, of which 75 percent was fixed.

1) Compute the eight variances that were discussed in class.

a-DM price variance VP=(AP-SP) x AQ ,

b-DM Quantity Variance VQ= (AQ-SQ) X SP

c-DL Price variance VP=(AP-SP) X AQ

d-DL quantity variance VQ=(AQ-SQ) X SP

e-VOH Price Variance VP=(AP-SP) X AQ

f-VOH Quantity variance VQ=(AQ-SQ) X SP

g-FOH Spending variance SP variance= Actual OH incurred - OH budgeted

h-FOH production volume variance PVV=OH Budgeted -Standard OH applied

2) Discuss some of the possible reasons why the variances computed turned out to be those amounts.