Clarissa McWhirter, vice-president of Cyprus Company, was pleased to see a small variance on the income statement after the trouble the company had been having in controlling manufacturing costs. She noted that the $12,250 overall manufacturing variance reported last period was well below the 3% limit that had been set for variances. The company produces and sells a single product. The standard cost card for the product follows:

Standard Cost Card -Per Unit

Direct materials, 4 metres at $3.50 per metre$14

Direct labour, 1.5 direct labour-hours at $12 per direct labour-hour18

Variable overhead, 1.5 direct labour-hours at $2 per direct labour-hour3

Fixed overhead, 1.5 direct-labour hours at $6 per direct labour-hour9

Standard cost per unit44

The following additional information is available for the year just completed:

a. The company manufactured 20,000 units of product during the year.

b. A total of 78,000 metres of material was purchased during the year at a cost of $3.75 per metre. All of this material was used to manufacture the 20,000 units. There were no beginning or ending inventories for the year.

c. The company worked 32,500 direct labour-hours during the year at a cost of $11.80 per hour.

d. Overhead cost is applied to products on the basis of standard direct labour-hours. Data relating to manufacturing overhead costs follow:

Denominator activity level (direct labour-hours)25,000

Budgeted fixed overhead costs (from the flexible budget)$150,000

Actual fixed overhead costs$148,000

Actual variable overhead costs$68,250

Required:

• Compute the direct materials price and quantity variances for the year.
• Compute the direct labour rate and efficiency variances for the year.
• For manufacturing overhead, compute the following:
• The variable overhead spending and efficiency variances for the year.
• The fixed overhead budget and volume variances for the year.
• Total the variances you have computed, and compare the net amount with the $12,250 mentioned by the vice-president Do you think that everyone should be congratulated for a job well done? Explain.