Kartman Corporation makes a product with the following standard costs:

	Standard Quantity or Hours	Standard Price or Rate	Standard Cost Per Unit
Direct materials	6.5	pounds	$ 7.00	per pound	$ 45.50
Direct labor	0.6	hours	$ 24.00	per hour	$ 14.40
Variable overhead	0.6	hours	$ 4.00	per hour	$ 2.40

In June the company's budgeted production was 3,400 units but the actual production was 3,500 units. The company used 22,150 pounds of the direct material and 2,290 direct labor-hours to produce this output. During the month, the company purchased 25,400 pounds of the direct material at a cost of $170,180. The actual direct labor cost was $57,021 and the actual variable overhead cost was $8,931.

The company applies variable overhead on the basis of direct labor-hours. The direct materials purchases variance is computed when the materials are purchased.

The variable overhead efficiency variance for June is:

		$741 F
		$760 U
		$741 U
		$760 F

Which of the following statements is true?

1. Variable manufacturing overhead costs are treated as product costs under both absorption and variable costing.
2. Absorption costing treats all manufacturing costs as product costs.

		Only statement I is true.
		Neither statement is true.
		Both statements are true.
		Only statement II is true.