The managers of Johnson DVD, Co., a contract manufacturer of DVD drives, are seeking explanations for the variances in the following report.

Requirement 

1. Explain the meaning of each of Johnson’s materials, labor, and overhead variances.

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Sales revenue JOHNSON DVD CO. Standard Cost Income Statement Year Ended December 31, 2011 Cost of goods sold at standard cost Manufacturing cost variances: $1,200,000 $700,000 Direct materials price variance $ 10,000 F Direct materials efficiency variance 32,000 U Direct labor price variance 24,000 F Direct labor efficiency variance 10,000 U Overhead flexible budget variance 28,000 U Production volume variance 8,000 F Total manufacturing variances 28,000 Cost of goods sold at actual cost Gross profit 728,000 472,000 Marketing and administrative costs Operating income 418,000 69 $ 54,000