Exercise 16-36 (Algo) Variable Cost Varlances (LO 16-5) Paynesville Corporation manufactures and sells a preservative used in food and drug manufacturing. The company carries no inventories. The master budget calls for the company to manufacture and sell 102,000 liters at a budgeted price of $90 per liter this year. The standard direct cost sheet for one liter of the preservative follows. Direct materials Direct labor (2 pounds @$5) $10 (0.5 hours @ $26) 13 Variable overhead is applied based on direct labor hours. The variable overhead rate is $30 per direct-labor hour. The fixed overhead rate (at the master budget level of activity) is $15 per unit. All non-manufacturing costs are fixed and are budgeted at $1.3 million for the coming year At the end of the year, the costs analyst reported that the sales activity variance for the year was $312,000 unfavorable. The following is the actual income statement (in thousands of dollars) for the year Sales revenue Less variable costs Direct materials Direct labor $8,838 958 1,160 Variable overhead 1,430 Total variable costs $3,548 Contribution margin $5,290 Less fixed costs Fixed manufacturing overhead 1,060 Non-manufacturing costs 1,240 Total fixed costs $2,300 $2,990 Operating profit During the year, the company purchased 178,000 pounds of material and employed 41,400 hours of direct labor. Required: a. Compute the direct material price and efficiency variances