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QUESTION 2: Sontag Corporation uses a standard costing system. The Company has come up with the following standard variable cost for one unit of its product. Direct materials 3 meters @ $13 per meter $39 Direct labour 1.5 hours @ $8.5 per hour $12.75 Variable manufacturing overhead 1.5 hours @ $4.5 per hour $6.75 $58.5 The Company has budgeted fixed overhead costs of $52,000 based on an estimated normal capacity of 16,000 direct labour hours. During the year, the company's production and sales were 13,000 units. Other information consisted of the following: Company purchased 38,000 meters of materials for a total cost of $494,000. All of these materials were used in production. Actual total labour cost was $137,250 based on total hours worked of 15,250 hours. Actual variable manufacturing overhead costs were $72,500 and actual fixed manufacturing overhead costs were $54,000. Required: a) Calculate direct materials price and quantity variance and state whether the variance is favorable or not b) Calculate direct labour rate and efficiency variance and state whether the variance is favorable or not c) Calculate the manufacturing overhead controllable (spending) and volume variance and state whether the variance is favorable or not d) Explain why (in one sentence for each variance) you stated favorable or unfavorable to variances calculated in (a), (b) and (c) above