ces Exercise 16-36 (Algo) Variable Cost Variances (LO 16-5) Paynesville Corporation manufactures and sells a preservative used in food and drug manufacturing. The company carties no Inventories. The master budget calls for the company to manufacture and sell 18.000 liters at a budgeted price of $210 per liter this year. The standard direct cost sheet for one liter of the preservative follows Direct materials Direct labor (2 pounds $13) $26 Variable overhead is applied based on direct labor hours. The variable overhead rate is $10 per direct labor hour The fixed overhead rate (at the master budget level of activity) is $55 per unit. All non-manufacturing costs are fixed and are budgeted at $2.1 million for the coming year. At the end of the year, the costs analyst reported that the sales activity variance for the year was $648,000 unfavorable The following is the actual income statement (in thousands of dollars) for the yea Sales reve Less variable costs Direct materials Direct labor $23,798 3,576 2,360 Variable overhead 5,ae Total variable cust Contribution margin $13,030 Las fixed costs Fixed manufacturing warhead 1,140 Sonfacturing costs Total fixed costs 1,900 2,468 Operating profit $30,578 Help Save & Exit Submit