Basic Variance Analysis, Revision of Standards, Journal Entries Petrillo Company produces engine parts for large motors. The company uses a standard cost system for production costing and control. The standard cost sheet for one of its higher volume products (a valve) is as follows Direct materials (7 lbs. $5.40) $37.80 Direct labor (1,75 hrs. $18) 31.50 Variable overhead (1,75 hes. $4,00) 7.00 Fixed overhead (1.75 hrs. O 53,00) 5.25 Standard cost per unit $81.55 During the year, Petrillo had the following activity related to valve production Production of valves totaled 20,600 units b. A total of 135,600 pounds of direct materials was purchased at $5.36 per pound. c. There were 10,000 pounds of direct materials in beginning inventory (carried at $5,40 per pound). There was no ending inventory d. The company used 36,500 direct labor hours at a total cost of $656,270. 6. Actual fixed overhead totaled $110,000 f. Actual variable overhead totaled $168,000 Petrillo produces all of its valves in a single plant. Normal activity is 20,000 units per year. Standard overhead rates are computed based on normal activity measured in standard direct labor hours. Required: 1. Compute the direct materials price and usage variances MPV 5,416 X Favorable MUV 6,480 X Unfavorable 2. Compute the direct labor rate and efficiency variances. 2. Compute the direct labor rate and efficiency variances. Labor Rate Variance 730 Favorable Labor Eficiency Variance 8,100 Unfavorable v 3. Compute overhead variances using a two variance analysis Budget Variance 168,000 X Favorable X Volume Variance 36,500 X Favorable 4. Compute overhead variances using a four-variance analysis. Variable overhead spending variance 22,000 Unfavorable Variable overhead efficiency variance 1,800 Unfavorable Fixed overhead spending variance 5,000 Unfavorable Fixed overhead volume variance 3,150 Favorable