Injection Processors Inc. (IPI) manufactures a special microchip for aircraft sensing systems. The standard selling price of the microchip is $150 per unit, and the company has the following monthly budgets for production and sales for the quarter to 30

September (assume that there is no change in stock levels).

Units
July	1,700
August	1,900
September	1800

The management accountant has prepared the following standard product cost specification per microchip:

$
Direct material	40 g at $2 per g	80
Direct labour	1 hour at $25 per hour	25
Variable manufacturing overhead	1 hour at $10 per hour	10
115

Variable manufacturing overhead is allocated to production on the basis of direct labour hours. Fixed overheads are budgeted at $9,000 per month.

During August, IPI produced and sold 2,000 microchips. The following actual data have

been extracted from IPIs financial records for August:

Sales	2,000 @ $152	304,000
Direct materials costs	90,000 g at $1.87 per g	168,300
Direct labour costs	1,960 hours at $25.50 per hour	49,980
Variable manufacturing overhead		18,000
Fixed manufacturing overhead		10,000

1. Identify and prepare a schedule of variances to highlight IPIs performance in August that reconciles the budgeted profit with the actual profit. Show all workings.2. Determine a detailed list of possible causes of any material, labour or fixed overhead cost variances identified.