Vermont Mills, Inc., is a large producer of men's and women's clothing. The company uses standard costs for all of its products. The standard costs and actual costs for a recent period are given below for one of the company's product lines (per unit of product):

During this period, the company produced 4,800 units of product. A comparison of standard and actual costs for the period on a total cost basis is given below:

Actual costs: 4,800 units at $24.54 . . . . . . . . . . $117,792
Standard costs: 4,800 units at $24.48 . . . . . . . 117,504
Difference in cost'unfavorable . . . . . . . . . . . . $ 288

There was no inventory of materials on hand to start the period. During the period, 21,120 yards of materials were purchased and used in production.

Required:
1. For direct materials:
a. Compute the price and quantity variances for the period.
b. Prepare journal entries to record all activity relating to direct materials for the period.
2. For direct labor:
a. Compute the rate and efficiency variances.
b. Prepare a journal entry to record the incurrence of direct labor cost for the period.
3. Compute the variable manufacturing overhead spending and efficiency variances.
4. On seeing the $288 total cost variance, the company's president stated, "This variance of $288 is only 0.2% of the $117,504 standard cost for the period. It's obvious that our costs are well under control." Do you agree? Explain.
5. State possible causes of each variance that you havecomputed.

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Standard Actual Cost Cost Direct materials: Standard: 4.0 yards at $3.60 per yard$14.40 Actual: 4.4 yards at $3.35 per yard Actual: 1.4 hours at $4.85 per hour Standard: 1.6 hours at $1.80 per hour .. $14.74 Direct labor: 7.20 6.79 Variable manufacturing overhead: 2.88 Actual: 1.4 hours at $2.15 per hour 3.01 Total cost per unit . .. $24.48 $24.54