Exercise #3 Paradis Ltd adopts a standard costing system. The standard cost card for their product is as follows: Direct material $14.50 Direct labour (2 hours at $25 per hour) $50.00 Manufacturing overhead (2 hours at $11 per hour) $22.00 Total standard cost $86.50 The annual budgeted manufacturing overhead totals $6,600,000, of which $3,600,000 is variable. The company allocates overhead costs based on machine hours and calculates separate rates for variable and fixed overheads. The normal annual level of machine hours is 600,000 hours. The planned production for each month is 25,000 units. Paradis Ltd produced 26,000 units this month and used 53,500 machine hours. Actual manufacturing overhead for the month was $320,000 variable and $260,000 fixed. The total manufacturing overhead applied during the month was $572,000. Required: (a) Calculate the variable overhead and fixed overhead variances, indicating whether each variance is favourable or unfavourable. (b) Prepare journal entries to record: (i) Actual overhead costs (ii) Adding manufacturing overhead to work in process inventory. (iii) The closing of variances to cost of goods sold