Reference no: EM132783954

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 @ 54) 5 8
Direct labor (0.5 hours @ 524) 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.

The standard direct cost sheet for one liter of the preservative follows.

Sales revenue 57,238
Less variable costs
Direct materials 748
Direct labor 1,010
Variable overhead 930
Total variable costs $2,688
Contribution margin 54,550
Less fixed costs
Fixed manufacturing overhead 1,050
Non-manufacturing costs 1,230
Total fixed costs 52,280
Operating profit 52,270

Question 1: What are the fixed overhead price and production volume variances for Paynesville? (Enter your answers in whole dollars. Indicate the effect of each variance by selecting "F" for favorable, or "U" for unfavorable. If there is no effect, do not select either option.)