Petersen Pottery started out as a two-man operation for ceramic bathroom fixtures (sinks, toilets, and bathtubs). Eventually it grew to 20 master potters, and the fixtures had become known for their distinctive customer features, high quality, and long life. Clive Petersen, the owner, felt that he had expanded to a point that he needed to institute a formal accounting control system. The insistence of his banker that he get a "real" management accounting system in place was also compelling. As a result, Petersen hired a formally trained management accountant who began working with his most experienced master potters to design cost standards. After some research, Petersen's accountant arrived at the following cost standards for a toilet (note that manufacturing overhead is allocated based on direct labor hours):

After six months of operations, Petersen was disturbed over the lack of attention paid to the standards by his potters. He felt that the potters were too set in their ways to adhere to the new system. Many of the potters told Petersen that the new system was "confusing" and didn't help them in their work. In reviewing the June production results, the following actual costs were noted in connection with manufacturing 1,145 toilets:
Materials used:
Raw clay . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28,900 lbs. at $0.92 per lb.
Glazing mix . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,900 lbs. at $0.78 per lb.
Direct labor:
Molding. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,200 hrs. at $15.25 per hour (average)
Glazing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .600 hrs. at $15.00 per hour (average)
Actual variable manufacturing overhead . . . . . . . . $5,120
Actual fixed manufacturing overhead. . . . . . . . . . .$9,700
1. Compute all cost variances for the month of June.
2. What suggestions do you have for Petersen regarding his new standard costsystem?

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Direct materials: Raw clay Glazing mix Direct labor: 25 bs. x S0.95 per Ib. = $23.75 5 lbs. x S0.75 per Ib. = 3.75 1.0 hr. x $15.00 per hour = 15.00 7.50 0.5 hr. x $15.00 per hour = 4.50 1.5 hrs. x $3.00 per hour = 2.0 hrs. x $4.00 per hour = Molding Glazing Variable manufacturing overhead. Fixed manufacturing overhead Total per fixture 8.00 $62.50 *Based on budgeted production of 1,200 tolets.