ABC Ltd produced 7,800 gadgets (one of its many products) during July.

The accounting records indicated the following:

Direct material purchased25,000 kilograms @ $2.60 per kilogramDirect material used23,100 kilogramsDirect labour used40,100 hours @ $18 per hour

The widget has the following standard prime costs:

Direct material: 3 kilograms @ $2.50 per kilogram

$7.50Direct labour hours: 5 hours @ $17 per hour$85.00Standard prime cost per unit$92.50

In relation to fixed and variable overheads Benita Ltd has the following standards and flexible budget data for all its products:

Standards and Flexible Budget Data:

Standard variable overhead rate

$18 per direct labour hourStandard quantity of direct labour2 hours per unit of outputBudgeted fixed overhead$300,000

Budgeted output25,000 units

Actual results for July are as follows:

Actual output

20,000 unitsActual variable overhead$960,000Actual fixed overhead$291,000

Actual direct labour50,000 hours

Required:

For the month of July, calculate the following variances, indicating whether each is favourable or unfavourable:

A) Direct material and labour variances identifying (calculating) the direct material price and quantity variances and the direct labour rate and efficiency variances separately (4.5 marks)

B) Variable overhead variances identifying (calculating) the spending variance and efficiency variances separately (1.5 marks)

C) Fixed overhead budget variance and the fixed overhead volume variance (1.5 marks)