8-47 Automation and Direct Labor as Overhead Kilgore Precision Machining (KPM) has a highly automated manufacturing process for producing a variety of auto parts. Through the use of computeraided manufacturing and robotics, the company has reduced its labor costs to only 5% of total manufacturing costs. Consequently, the company does not account for labor as a separate item but instead accounts for labor as part of overhead. Consider a part used in antilock braking systems. The static budget for producing 750 units in March 20X] is as follows: Direct materials $18,000* Overhead Supplies 1,875 Power 1,3 10 Rent and other building services 2,815 Factory labor 1,500 Depreciation 4,500 Total manufacturing costs $30,000 *3 lbiunit * $8-'lb * 750 units. Supplies and power are variable, and the other overhead items are xed costs. Actual costs in March 20X1 for producing 900 units of the brake part were as follows: Direct materials $21,840* Overhead Supplies 2, 1 32 Power 1,612 Rent and other building services 2,??5 Factory labor 1,613 Depreciation 4,500 Total manufacturing costs $34,4'i'7 *KPM purchased and used 2,800 pounds of materials at $180 per pound. 1. Compute (a) the directmaterials price and quantity variances and (h) the flexiblebudget variance for each overhead item. 2. Comment on the way KPM accounts for and controls factory labor