ABC Company had the following budget for November 2018: Budgeted Contribution Income Statement Sales (1,800 units) Less variable costs Variable cost of goods sold Direct materials (10 ounces/ unit) November 2018 Direct labor (1.2 labor hours / unit) Manufacturing overhead (0.25 machine hours / unit) Selling (based directly on units) Contribution margin Less fixed cost Manufacturing overhead Selling Administrative Net income $450,000 $90,000 36,000 27,000 $153,000 108,000 261,000 189,000 80,000 60,000 21,000 161,000 $28,000 Earlier in the year, demand for their product increased sharply. They raised the price some in an attempt to optimize profitability. Acquiring additional materials was not a big problem. In fact, their supplier was happy to see them raise their quantity per order. Conversely, labor was a more difficult problem. The community around the plant had low unemployment and a fairly stable population. Thus, the only option was to offer the current employees overtime at 1.5 times their normal hourly wage. And, the only option with the machinery was to run it more hours and "baby" it so that it would not breakdown. Overall the results at the end of the month looked pretty good: Actual Contribution Income Statement Sales (2,500 units) Less variable costs November 2018 $687,500 Variable cost of goods sold Direct materials (25,500 ounces) $125,000 Direct labor (3,200 labor hours) 57,500 Manufacturing overhead (550 machine hours) 48,750 $231,250 Selling (based directly on units) 188,000 419,250 Contribution margin 268,250 Less fixed cost Manufacturing overhead 78,000 Selling Administrative Net income 75,000 23,000 176,000 $92,250 Your job is to prepare for a meeting between the owner and the president of ABC Company. The owner has asked you to be ready to describe all differences between budgeted and actual numbers. Variance Total Volume Variance in terms of Net Income Sales Price Variance Direct Materials Efficiency Variance Direct Materials Price Variance Direct Labor Efficiency Variance Direct Labor Rate Variance Variable Manufacturing Overhead Efficiency Variance Variable Manufacturing Overhead Spending Variance Variable Selling Spending Variance Fixed Manufacturing Overhead Spending Variance Fixed Selling Spending Variance Fixed Administrative Spending Variance Amount Concise Explanation for the Owner Note: The sum of all variances should be the $64,250 Favorable difference between Budgeted and Actual Net Income.