Haliburton Mills Inc. is a large producer of men$$s and women$$s clothing. The company uses standard costs for all of its products. The standard costs and actual costs for a recent period are given below for one of the company$$s product lines $($per unit of product$)$:

Standard

Cost Actual

Cost

Direct materials:

Standard: $2\mathrm{.}0$ metres at $$4\mathrm{.}80$ per metre $ $9\mathrm{.}60$

Actual: $2\mathrm{.}4$ metres at $$4\mathrm{.}55$ per metre $ $10\mathrm{.}92$

Direct labour:

Standard: $2\mathrm{.}8$ hours at $$2\mathrm{.}50$ per hour $7\mathrm{.}00$

Actual: $2\mathrm{.}4$ hours at $$2\mathrm{.}85$ per hour $6\mathrm{.}84$

Variable manufacturing overhead:

Standard: $2\mathrm{.}8$ hours at $$2\mathrm{.}60$ per hour $7\mathrm{.}28$

Actual: $2\mathrm{.}4$ hours at $$3\mathrm{.}10$ per hour $7\mathrm{.}44$

Fixed manufacturing overhead:

Standard: $2\mathrm{.}8$ hours at $$4\mathrm{.}20$ per hour $11\mathrm{.}76$

Actual: $2\mathrm{.}4$ hours at $$4\mathrm{.}25$ per hour $10\mathrm{.}20$

Total cost per unit $ $35\mathrm{.}64$ $ $35\mathrm{.}40$

Actual costs: $9,600$ units at $$35\mathrm{.}40$ $ $339,840$

Standard costs: $9,600$ units at $$35\mathrm{.}64342,144$

Difference in cost$$favourable $ $2,304$

During this period, the company produced $9,600$ units of product. A comparison of standard and actual costs for the period on a total cost basis is also given above.

There was no inventory of materials on hand to start the period. During the period, $23,040$ metres of materials was purchased and used in production. The denominator level of activity for the period was $23,420$ hours.

Required:

$1.$ For direct materials:

a$.$ Compute the price and quantity variances for the period. $($Indicate the effect of each variance by selecting $"$F$"$ for favourable, $"$U$"$ for unfavourable, and "None" for no effect $($i$.$e$.,$ zero variance$).)$

b$.$ Prepare journal entries to record all activity relating to direct materials for the period.

$2.$ For direct labour:

a$.$ Compute the rate and efficiency variances. $($Indicate the effect of variance by selecting $"$F$"$ for favourable, $"$U$"$ for unfavourable, and "None" for no effect $($i$.$e$.,$ zero variance$).)$

b$.$ Prepare a journal entry to record the incurrence of direct labour cost for the period. $($List debit entries first$).$

$3.$ Compute the variable manufacturing overhead spending and efficiency variances. $($Indicate the effect of each variance by selecting $"$F$"$ for favourable, $"$U$"$ for unfavourable, and "None" for no effect $($i$.$e$.,$ zero variance$).)$

$4.$ Compute the fixed overhead budget and volume variances. $($Indicate the effect of variance by selecting $"$F$"$ for favourable, $"$U$"$ for unfavourable, and "None" for no effect $($i$.$e$.,$ zero variance$).)$

$5.$ On seeing the $$2,304$ total cost variance, the company$$s president stated, $$It$$s obvious that our costs are well under control.$$ Do you agree?

multiple choice

Yes

No