1.Compute the following variances for April:

A.Direct materials price and usage variances (Hint: the quantities purchased and used are different. Calculate the price variance on the quantity purchased and the usage variance on the raw materials used);

B.Direct labor rate and efficiency variances;

C.Variable manufacturing overhead spending and efficiency variances.

2.Summarize the variances that you computed in (1) above by showing the net overall favorable of unfavorable variance for April. What impact did this figure have on the companys income statement?

3.Pick out the two most significant variances that you computed in (1) above. Explain to Mr. Santi- ago some possible causes for these variances

Variance Analysis (25 points) Portland Company's Ironton Plant produces precast ingots for industrial use. Carlos Santiago, who was recently appointed general manager of the Ironton Plant, has just been handed the plant's income state- ment for April. The statement is shown below: Budgeted Actual $250,000 $250,000 Variable cost of goods sold * 80,000 96,390 Variable selling expenses 20,000 20,000 Total variable expenses $100,000 $116,390 Contribution margin $150,000 $133,610 Manufacturing overhead 60,000 60,000 Selling and administrative 75,000 75,000 Total fixed expenses $135,000 $135,000 Net operating income (loss) $ 15,000 $ (1,390) Sales (5,000 ingots). Less variable expenses: Less fixed expenses: * Contains direct materials, direct labor, and variable manufacturing overhead Mr. Santiago was shocked to see the loss for the month, particularly since sales were exactly as budgeted. He stated, \"I sure hope the plant has a standard cost system in operation. If it doesn't, I won't have the slightest idea of where to start looking for the problem.\" The plant does use a standard cost system, with the following standard variable cost per ingot: Standard Amount Standard Rate/Price Standard Cost Direct materials 4.0 pounds $2.50 per pound $10.00 Direct labor 0.6 hours $9.00 per hour 5.40 Variable manufacturing overhead 0.3 hours* $2.00 per hour 0.60 Total standard variable cost $16.00 * Based on machine-hours. Mr. Santiago has determined that during April the plant produced 5,000 ingots and incurred the following costs: 1. Purchased 25,000 pounds of materials at a cost of $2.95 per pound. There were no raw materials in inventory at the beginning of the month. 2. Used 19,800 pounds of materials in production. There were no work-in-process or finished goods inventories at the beginning or the end of the month. 3. Worked 3,600 direct labor-hours at a cost of $8.70 per hour. 4. Incurred a total variable manufacturing overhead cost of $4,320 for the month. A total of 1,800 machine hours was recorded. It is the company's policy to close all variances to cost of goods sold at the end of each month. Required: 1. Compute the following variances for April: A. Direct materials price and usage variances (Hint: the quantities purchased and used are different. Calculate the price variance on the quantity purchased and the usage variance on the raw materials used); B. Direct labor rate and efficiency variances; C. Variable manufacturing overhead spending and efficiency variances. 2. Summarize the variances that you computed in (1) above by showing the net overall favorable of unfavorable variance for April. What impact did this figure have on the company's income statement? 3. Pick out the two most significant variances that you computed in (1) above. Explain to Mr. Santi- ago some possible causes for these variances