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. o $5.40) $37.80 Direct labor (1.75 hrs. O $18) 31.50 Variable overhead (1.75 hrs. $4.00) 7.00 Fixed overhead (1.75 hrs. O $3.00) 5.25 Standard cost per unit $81.55 During the year, Petrillo had the following activity related to valve production: a. 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 (candied 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. e. Actual fixed overhead totaled $111,000. f. Actual variable overhead totaled $167,000 Petrillo produces all of its valves in a single plant. Normal activity is 20,000 units per vear Standard overhead rates are computed based on normat activity measured in standard direct labor hours, Required: 1. Compute the direct materials price and usage variances Required: 1. Compute the direct materials price and usage variances. MPV 5 Favorable MUV Unfavorable 2. Compute the direct labor rate and efficiency variances Labor Rate Variance Labor Efficiency Variance Favorable Unfavorable 3. Compute overhead variances using a two variance analysis. Budget Variance Unfavorable Volume Variance 3,150 Favorable 4. Compute overhead variances using a four-variance analysis, Unfavorable Variable overhead spending variance Variable overhead efficiency variance Fixed overhead spending variance Unfavorable Unfavorable Fixed overhead volume variance 3,150 Unfavorable 5. Assume that the purchasing agent for the valve plant purchased a lower quality direct material from a new supplier. Would you recommend that the company continue to use this cheaper direct material? 5. Assume that the purchasing agent for the valve plant purchased a lower-quality direct material from a new supplier. Would you recommend that the company continue to use this cheaper direct material? No 6. Prepare all possible journal entries (assuming a four-variance analysis of overhead variances). For compound entries, an amount tox does not require an entry, leave it blank. a. Record materials purchase Materials Direct Materials Price Variance Accounts Payable b. Record materials usage Work in Process Direct Materials Usage Variance Materials