Cordon Corporation set the following standard unit costs for its single product:

Direct materials (25 lbs @ $4 per lb) $100 per unit

Direct labor (6 hrs @ $8 per hr) 48 per unit

Factory overhead variable (6 hrs @ $5 per hr) 30 per unit

Factory overhead fixed (6 hrs @ $7 per hr) 42 per unit

Total Standard cost $220 per unit

The predetermined overhead rate is based on a planned operating volume of 80% of the productive capacity of 60,000 units per quarter. The following flexible budget information is available:

Operating levels

70% 80% 90%

Production in units 42,000 48,000 54,000

Standard direct labor hours 252,000 288,000 324,000

Budgeted overhead

Fixed MOH $2,016,000 $2,016,000 $2,016,000

Variable MOH 1,260,000 1,440,000 1,620,000

During the current quarter, the company operated at 70% of capacity and produced 42,000 units of product: direct labor hours worked were 250,000. Units

Produced were assigned the following standard costs:

Direct materials (1,050,000 lbs @ $4 per lb.) $4,200,000

Direct labor (252,000 hrs @ $8 per hr) 2,016,000

Factory overhead (252,000 hrs @ $12 per hr) 3,024,000

Total standard cost $9,240,000

Actual costs incurred during the current quarter follow:

Direct materials (1,000,000 @ $4.25 per lb) $4,250,000

Direct labor (250,000 hrs @ $7.75 per hr) 1,937,500

Fixed factory overhead costs 1,960,000

Variable factory overhead costs 1,200,000

Total actual costs $9,347,500

Required:

Prepare the level 3 variance analysis on Direct materials, and Direct labor. Include a description of what occurred.