Craig Corp. (CC) produces a popular brand of widgets which it sells to wholesalers at a price of $56. CC uses standard costing and has determined the following standard costs for a budgeted production level of 25,000 units:

Direct materials 2 metres @ $8.5 per metre

Direct Labour 1.5 hours @ $20 per DLH

Variable MOH 1.5 hours @ $4 per DLH

Fixed MOH 1.5 hours @ $6 per DLH

In the most recent month, a total of 28,000 units were produced and sold.

Additional information:

1. CC purchased 58,000 metres of direct materials during the month at a total cost of $490,100. It had 1,500 metres on hand at the beginning of the month, and it ended the month with 2,700 metres.
2. During the month, CC incurred 42800 direct labour hours at a total cost of $813,200.
3. The total manufacturing overhead during the month was $400,000, of which variable manufacturing overhead consisted of $181,900.

Required:

a) Calculate the following variances and note them in the blanks.

Labour rate Variance was $, (State F for favourable, U for unfavourable)

Labour efficiency Variance was $, (State F for favourable, U for unfavourable)

b) Calculate the following variances are note them in the blanks.

Fixed overhead budget variance was $, (State F for favourable, U for unfavourable)

Fixed overhead volume variance was $, (State F for favourable, U for unfavourable)

Prepare the journal entry(entries) necessary to record the variances calculated in Question 1 part a) above.

Considering the variances calculated in Question 1, identify which variance would be most important to investigate further. Other than an incorrect standard, provide a possible explanation for the variance.