Question 4 - Flexible Budgets and Variance Analysis (10 marks) Marvel Company produces an industrial chemical. At the beginning of the year, management prepared the following standard cost sheet: Direct materials (10kg @ $1.60/kg) $16.00 Direct labour (0.75 hrs @ $18.00/hr) 13.50 Fixed overhead (0.75 hrs @ $4.00/hr) 3.00 Variable overhead (0.75 hrs (@$3.00/hr) 2.25 Standard cost per unit $34.75 The company calculates its overhead rates at a budgeted level of 72,000 units (the denominator level of activity). Overhead is allocated to output using direct labour hours. The company isolates direct material variances on purchases (not usage). The actual results for the year are: Units produced: 70,000 Materials purchased: 744,000 kilograms at $1.50 Materials used: 736,000 kilograms Direct labour: 56,000 hours at $17.90 Fixed overhead: $214,000 Variable overhead: $175,400 Required: Name and calculate: the two standard cost variances for direct material and the two standard cost variances for direct labour