Reference no: EM132755181

Question - Paynesville Corporation manufactures and sells a preservative used in food and drug manufacturing. The company carries no inventories. The master budget calls for the company to manufacture and sell 100,000 liters at a budgeted price of $75 per liter this year. The standard direct cost sheet for one liter of the preservative follows.

Direct materials (2 pounds @ $4) $8

Direct labor (0.5 hours @ $24) 12

Variable overhead is applied based on direct labor hours. The variable overhead rate is $20 per direct-labor hour. The fixed overhead rate (at the master budget level of activity) is $10 per unit. All non-manufacturing costs are fixed and are budgeted at $1.2 million for the coming year.

At the end of the year, the costs analyst reported that the sales activity variance for the year was $270,000 unfavorable.

The following is the actual income statement (in thousands of dollars) for the year.

Sales revenue $7,238

Less variable costs Direct materials 748

Direct labor 1,010

Variable overhead 930

Total variable costs $2,688

Contribution margin $4,550

Less fixed costs Fixed manufacturing overhead 1,050

Non-manufacturing costs 1,230

Total fixed costs $2,280

Operating profit $2,270

During the year, the company purchased 176,000 pounds of material and employed 40,400 hours of direct labor.

Required -

a. Compute the direct material price and efficiency variances.

b. Compute the direct labor price and efficiency variances.

c. Compute the variable overhead price and efficiency variances.