Chapter 10 The Leonard Division of Lowry Company produces small kitchen appliances. The company uses a standard cost system for production costing and control. The standard cost sheet for its most popular product, a toaster, is given below. Cost per toaster Direct materials (2.5 kg @ $4.00/kg) $10.00 Direct labour (0.7 hr. @ $10.50/hr.) 7.35 Variable overhead (0.7 hr. @ $6.00/hr.) 4.20 Fixed overhead (0.7 hr. @ $3.00/hr.) 2.10 Standard unit cost $23.65 During the year, Emerson experienced the following activity relative to the production of toasters: 3. Production of toasters totalled 50,000 units. b. A total of 130,000 kg of raw materials was purchased at $3.70 per kg. C . 120,000 kg of raw materials were used. d. The company used 36,500 direct labour hours at a total cost of $392,375. Actual fixed overhead totalled $95,000. Actual variable overhead totalled $210,000. Emerson produces all of its toasters in a single plant. Planned activity is 45,000 units per year. Standard overhead rates are computed based on normal activity measured in standard direct labour hours. REQUIRED: 1. Calculate 2 variances for each of: Materials, Labour, Variable Overhead and Fixed Overhead. 2. Prepare journal entries to record the Materials and Labour variances. 3. To save on labour costs, the company used less experienced workers in producing the toasters. Do you agree with this decision