Variance Analysis for Direct Materials, Direct Labor, Variable Overhead, and Fixed Overhead. Equipment Products, Inc., produces large ladders made of a specialized metal material. The master budget shows the following standards information and indicates the company expected to produce and sell 4,000 units for the month of May.

Direct materials	60 pounds per unit at $3 per pound
Direct labor	8 hours per unit at $14 per hour
Variable manufacturing overhead	8 direct labor hours per unit at $6 per hour

Equipment Products actually produced and sold 4,400 units for the month. During the month, the company purchased 300,000 pounds of material for $960,000 and used 286,000 pounds in production. A total of 30,800 labor hours were worked during the month at a cost of $462,000. Variable overhead costs totaled $195,000 for the month.

With regards to fixed manufacturing overhead, the company also applies these overhead costs to products based on direct labor hours. Fixed manufacturing overhead information for the month of May appears as follows.

1. Calculate the materials price variance and materials quantity variance using the format shown in Figure 4.4 Direct Materials Variance Analysis for Jerrys Ice Cream. Clearly label each variance as favorable or unfavorable.
2. Calculate the labor rate variance and labor efficiency variance using the format shown in Figure 4.6 Direct Labor Variance Analysis for Jerrys Ice Cream. Clearly label each variance as favorable or unfavorable.
3. Calculate the variable overhead spending variance and variable overhead efficiency variance using the format shown in Figure 4.8 Variable Manufacturing Overhead Variance Analysis for Jerrys Ice Cream. Clearly label each variance as favorable or unfavorable.
4. Company policy is to investigate all variances greater than 10 percent of the flexible budget amount for each of the 3 variable production costs: direct materials, direct labor, and variable overhead. Identify which of the six variances calculated in requirements a through c should be investigated.
5. Provide two possible explanations for each variance identified in requirement d.
6. Calculate the fixed overhead spending variance and production volume variance using the format shown in Figure 4.13 Fixed Manufacturing Overhead Variance Analysis for Jerrys Ice Cream. Clearly label each variance as favorable or unfavorable.

Budgeted fixed overhead costs $864,000 Budgeted direct labor hours 32,000 Standard cost per direct labor hour Actual fixed overhead costs for May 990,000