Feather Friends, Inc., distributes a high-quality wooden birdhouse that sells for $20 per unit. Variable expenses are $8 per unit, and fixed expenses total $180,000 per year. Its operating results for last year were as follows:

Sales	$	400,000
Variable expenses		160,000
Contribution margin		240,000
Fixed expenses		180,000
Net operating income	$	60,000

Required: ( 2.5 points total)

Answer each question independently based on the original data:

1. What is the variable cost per unit?
2. What is the break even point in units and sales dollars?
3. How many units must be sold to achieve a target profit of $85,000
4. If advertising increased by $35,000 , variable expense per unit increased by $2 and sales increased by $30,000:

• Will net income increase/decrease
• What will be the new net income amount?

Arvel Parts, Inc., manufactures auto accessories. One of the companys products is a set of seat covers that can be adjusted to fit nearly any small car. The company has a standard cost system in use for all of its products. According to the standards that have been set for the seat covers, the factory should work 1,035 hours each month to produce 2,070 sets of covers. The standard costs associated with this level of production are:

	Total		Per Set of Covers
Direct materials	$	31,878	$	15.40
Direct labor	$	6,210		3.00
Variable manufacturing overhead (based on direct labor-hours)	$	4,347		2.10
			$	20.50

During August, the factory worked only 500 direct labor-hours and produced 1,700 sets of covers. The following actual costs were recorded during the month:

	Total		Per Set of Covers
Direct materials (5,000 yards)	$	25,500	$	15.00
Direct labor	$	5,440		3.20
Variable manufacturing overhead	$	4,080		2.40
			$	20.60

At standard, each set of covers should require 2.0 yards of material. All of the materials purchased during the month were used in production.

Required: ( 2.5 points total)

1. Compute the materials price and quantity variances for August.

2. Compute the labor rate and efficiency variances for August.

3. Compute the variable overhead rate and efficiency variances for August.