Ayala Corporation accumulates the following data relative to jobs started and finished during the month of June 2020.

Compute variances, and prepare income statement.

Costs and Production Data		Actual		Standard
Raw materials unit cost		$2.25		$2.10
Raw materials units		10,600		10,000
Direct labor payroll		$120,960		$120,000
Direct labor hours		14,400		15,000
Manufacturing overhead incurred		$189,500
Manufacturing overhead applied				$193,500
Machine hours expected to be used at normal capacity				42,500
Budgeted fixed overhead for June				$55,250
Variable overhead rate per machine hour				$3.00
Fixed overhead rate per machine hour				$1.30

Overhead is applied on the basis of standard machine hours. Three hours of machine time are required for each direct labor hour. The jobs were sold for $400,000. Selling and administrative expenses were $40,000. Assume that the amount of raw materials purchased equaled the amount used.

Instructions

a. Compute all of the variances for (1) direct materials and (2) direct labor.

LQV $4,800 F

b. Compute the total overhead variance.

c. Prepare an income statement for management. (Ignore income taxes.)