Celestial Ceramics Ltd. makes high-end, artisan coffee mugs. The controller has prepared the following standard costs per box of mugs (6 mugs per box):

	Standard Quantity (or Hours)	Standard Price (or Rate)	Standard Cost per box of mugs
Direct Materials (clay)	1.7 kg	$5.50 / kg	$9.35
Direct Labour	0.5 hours	$12.00 / hr	$6.00
Variable Overhead	0.5 hours	$3.00 / hr	$1.50
Total Standard Cost(per box of mugs)			$16.85

The company allocates variable overhead based on direct labour hours. Last month, Celestial Ceramics Ld. produced 1,500 boxes of mugs and incurred the following actual costs:

Direct materials: Purchased 2,600 kg of clay at a cost of $5.25 per kilogram. 2,600 kg of clay was used in the production of the 1,500 boxes of mugs.

Direct labour: 760 hours worked, for a total cost of $9,500.

Variable overhead: Total cost was $2,500.

Required:

a) Calculate the direct materials price and quantity variances. Label your variances and indicate if favourable or unfavourable. (4 marks)

b) Calculate the direct labour rate and efficiency variances. Label your variances and indicate if favourable or unfavourable. (2 marks)

c) Calculate the variable overhead spending and variable overhead efficiency variances. Label your variances and indicate if favourable or unfavourable. (2 marks)