This is an extended question. Please answer in the space provided after the question. All workings must be clearly shown for this question.

Delta Company has developed the following standards for one of its products, DTC. The standard variable costs per unit of the product are as follows:

Direct materials: 25 square metres @ $10.50 per square metre $262.50

Direct labour: 8 hours @ $11 per hour 88.00

Variable manufacturing overhead: 8 labour hours @ $6 per labour hour 48.00

Total standard variable cost per unit $398.50

The following activities occurred during the month of May:

Units produced 5,000 units

Direct materials purchased 150,000 square metres at $11.25 per square metres

Direct materials used 120,000 square metres

Direct labour 42,000 hours at $12.50 per hour

Actual variable manufacturing overhead costs $240,000

Based on the information provided above, answer the following questions showing all workings: [Use the space below to answer the questions]

a. Compute the direct materials price and efficiency variances for the month of May and indicate whether the variances are favourable or unfavourable. Discuss possible causes of the direct materials price and efficiency variances. (8 marks)

b. Compute the direct labour rate and efficiency variances for the month of May and indicate whether the variances are favourable or unfavourable. Discuss possible causes of the direct labour rate and efficiency variances. (8 marks)

c. Compute the variable manufacturing overhead spending and efficiency variances for the month of May and indicate whether the variances are favourable or unfavourable. (4 marks)

d. "The variable manufacturing overhead efficiency variance has nothing to do with the efficient use of variable overhead". Discuss this statement, providing clear explanation as to why you agree or disagree with the statement. (4 marks)