*Contains direct materials, direct labour, and variable manufacturing overhead. Madison Eastwood, the general manager wants to get things under control. She needs information about December operations since the income statement showed that the problem could be due to the variable cost of goods sold. Eastwood learns the following about operations and costs in December: a. 31,300 kilograms of materials were purchased at a cost of $3.70 per kilogram. b. 24,300 kilograms of materials were used in production. (Finished goods and work-in-process inventories are insignificant and can be ignored.) c. 11,800 direct labour-hours were worked at a cost of $8 per hour. d. Variable manufacturing overhead cost totalling $22,496 for the month was incurred. A total of 5,920 machine-hours was recorded. It is the company's policy to close all variances to cost of goods sold on a monthly basis. Required: 1. Compute the following variances for December: a. Direct materials price and quantity variances. (Indicate the effect of each variance by selecting "F" for favourable, "U" for unfavourable, and "None" for no effect (i.e., zero variance).) Material price variance Material quantity variance F U None b. Direct labour rate and efficiency variances. (Indicate the effect of each variance by selecting "F" for favourable, "U" for unfavourable, and "None" for no effect (i.e., zero variance).) Labour rate variance Labour efficiency variance F U None c. Variable overhead spending and efficiency variances. (Indicate the effect of each variance by selecting "F" for favourable, "U" for unfavourable, and "None" for no effect (i.e., zero variance).) Variable overhead spending variance Variable overhead efficiency variance Direct materials Direct labour Maple Leaves Inc. produces portable ice rinks. The standard cost for one rink is as follows: Standard Quantity or Hours 1.60 kilograms 0.90 hours Standard Price or Rate $4.00 per kilogram Standard Cost $ 6.40 Variable manufacturing overhead 0.50 machine-hours $6.00 per hour $3.00 per machine-hour 5.40 1.50 Total standard cost $13.30 The plant has been having problems for some time, as is shown by its December income statement when it produced and sold 15,000 rinks; the normal amount is 15,150 rinks per month. Fixed costs are allocated using machine-hours. Flexible Budgeted Sales (15,000 rinks) Less: Variable expenses: Variable cost of goods sold* Variable selling expenses Total variable expenses Contribution margin Less: Fixed expenses: Manufacturing overhead. Selling and administrative Total fixed expenses Net income $ 450,000 Actual $450,000 199,500 204,706 20,000 20,000 219,500 224,706 230,500 225,294 130,000 130,000 84,000 214,000 $ 16,500 84,000 214,000 $ 11,294