Onasis Manufacturing Company uses a standard cost accounting system. In July 2002, it accumulates the following data relative to jobs started and finished.

Manufacturing overhead was applied on the basis of direct labor hours. Normal capac- ity for the month was 2,800 direct labor hours. At normal capacity, budgeted overhead costs were: variable \($56,000\) and fixed \($35,000\). Jobs finished during the month were sold for \($240,000\). Selling and administrative expenses were $25,000.

Instructions

(a) Compute all of the variances for direct materials, direct labor, and manufacturing overhead.

(b) Prepare an income statement for management. Ignore income taxes.

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Cost and Production Data Actual Standard Raw materials Units purchased 17,500 Units used 17,500 18,000 Unit cost Direct labor $3.40 $3.00 Hours worked Hourly rate 2,900 3,000 $11.80 $12.00 Manufacturing overhead Incurred Applied $87,500 $97,500