Last year, Panacea Laboratories, Inc., researched and perfected a cure for the common cold. Called Cold-Gone, the product sells for $28.00 per package, each of which contains five tablets. Standard unit costs for this product were developed late last year for use this year. Per package, the standard unit costs were as follows: chemical ingredients, 6 ounces at $1.00 per ounce; packaging, $1.20; direct labor, 0.8 hour at $14.00 per hour; standard variable overhead, $4.00 per direct labor hour; and standard fixed overhead, $6.40 per direct labor hour. Normal capacity is 46,875 units per week. In the first quarter of this year, demand for the new product rose well beyond the expectation of management. During those three months, the peak season for colds, the company produced and sold over 500,000 packages of Cold-Gone. During the first week in April, it produced 50,000 packages but used materials for 50,200 packages costing $60,240. It also used 305,000 ounces of chemical ingredients costing $292,800. The total cost of direct labor for the week was $579,600; direct labor hours totaled 40,250. Total variable overhead was $161,100, and total fixed overhead was $242,000. Budgeted fixed overhead for the week was $240,000. 1.) Compute and designate Favorable/Unfavorable for the first week of April: (a) All Direct Materials Price Variances For chemical ingredients = 1 - 0.96 = 0.04 x 305,000 = $12,200 (F) For packaging = 1.20 1.20 = 0 x 50,200 = 0 (U)

(b) All Direct Materials Quantity Variances For chemical ingredients = 1 x (300,000 305,000) = $-5,000 (U) For packaging = 1.20 (50,000 50,200) = - 240 (U)

(c) The Direct Labor Rate Variance (14 14.40) x 40250 = $-16,100 (U)

(d) The Direct Labor Efficiency Variance 14 x (40000 40250) = -3500 (U)

(e) The Variable Overhead Spending Variance (4 x 4250 hours) 161100 = -100 (U)

(f) The Variable Overhead Efficiency Variance 4 x (40000 40250) = -1000 (U)

(g) The Fixed Overhead Budget Variance 240000 242000 = -2000 (U)

(h) The Fixed Overhead Volume Variance (40000 x 6.40) 240000 = 16000 (F)

2.) Prepare a Performance Report based on your variance analysis and suggest possible causes for each significant favorable and unfavorable variance. Include the possible actions that would produce the variance. Be sure to clearly state how you determined which variances were significant.