6)Wonderful!Not only did our salespeople do good job in meeting the sales budget this year, but our production people did a good job in controlling costs as well," said Kim Clark, president of Martell Company."Our $19,790 overall manufacturing cost variance is only 1.54% of the $1,280,000 standard cost of products made during the year. That is well within the 3% parameter set by management for acceptable variances.It looks like everyone will be in line for a bonus this year."

The company produces and sells a single product.The standard cost card for the product follows:

Standard Cost Card - per Unit of Product

Direct materials, 2 feet at $8.45 per foot$16.90

Direct labor, 1.4 direct labor hours at $16 per direct labor hour22.40

Variable overhead, 1.4 direct labor-hours at $2.50 per direct labor-hour3.50

Fixed overhead, 1.4 direct labor-hours at $6 per direct labor8.40

Standard cost per unit$51.20

The following additional information is available for the year just completed:

The company manufactured 30,000 units of product during the year.

A total of 64,000 feet of material was purchased during the year at a cost of $8.55 per foot.All of this material was used to manufacture the 30,000 units.There was no beginning or ending inventories for the year.

The company worked 43,500 direct labor-hours during the year at a direct labor cost of $15.80 per hour.

Overhead is applied to products on the basis of standard direct labor-hours. Data relating to manufacturing overhead costs follow:

Denominator activity level (direct labor-hours)35,000

Budgeted fixed overhead costs (from the overhead flexible budget)$210,000

Actual variable overhead costs incurred$108,000

Actual fixed overhead costs incurred$211,800

Required:

a)Complete the eight variances

Direct materials price variance- V_P= (AP-SP) x AQ

Direct materials quantity variance-V_Q= (AQ-SQ) x SP

Direct labor price variance-V_P= (AP-SP) x AQ

Direct labor quantity variance-V_Q= (AQ-SQ) x SP

Variable overhead price variance-V_P= (AP-SP) x AQ

Variable overhead quantity variance-V_Q= (AQ-SQ) x SP

Fixed overhead spending variance- Sp Var = AOI - OB

Fixed overhead production volume variance- PVV = OB - SOA

b)Total the variances you have computed, and compare the net amount with the $19,790 mentioned by the president.Do you agree that bonuses should be given to everyone for good cost control during the year?Explain.