Michiana Company's Benton Harbor Plant produces precast ingots for industrial use. Angelo Lorenzo, who was recently appointed general manager of the Benton Harbor Plant, has just been handed the plant's contribution format income statement for October. The statement is shown below Budgeted $175,000 $175,000 Actual Sales (3,000 ingots) Variable expenses Variable cost of goods sold* Variable selling expenses 24,300 58,310 10,000 34,300 140,700 10,000 68,310 106,690 Total variable expenses Contribution margin Fixed expenses Manufacturing overhead Selling and administrative 50,000 65,000 50,000 65,000 115,000 S 25,700 $ (8,310) Total fixed expenses 115,000 Net operating income (loss) *Contains direct materials, direct labor, and variable manufacturing overhead Mr. Lorenzo was shocked to see the loss for the month, particularly because sales were exactly as budgeted. He stated, " sure hope the plant has a standard cost system in operation. If it doesn't, I won't have the slightest idea of where to start looking for the problem." The plant does use a standard cost system, with the following standard variable cost per ingot Standard Quantity Standard Price Standard or Hours 3.0 pounds 0.3 hours 0.2 hours* Cost $ 6.00 1.80 0.30 or Rate Direct materials Direct labor Variable manufacturing overhead $2.00 per pound $6.00 per hour $1.50 per hour Total standard variable cost $8.10 *Based on machine-hours. During October the plant produced 3,000 ingots and incurred the following costs a. Purchased 23,000 pounds of materials at a cost of $3.20 per pound. There were no raw materials in inventory at the beginning of the montlh b. Used 8,800 pounds of materials in production. (Finished goods and work in process inventories are insignificant and can be ignored.) c. Worked 2,000 direct labor-hours at a cost of $5.70 per hour d. Incurred a total variable manufacturing overhead cost of $1,710 for the month. A total of 900 machine- hours was recorded. It is the company's policy to close all variances to cost of goods sold on a monthly basis Required: 1. Assume that the company recognizes price variances when materials are purchased. Compute the following variances for October: a. Direct materials price and quantity variances. (Input all amounts as positive values. Indicate the effect of each variance by selecting "F" or favorable, "U" for unfavorable, and "None" for no effect (i.e., zero variance).) Materials price variance Materials quantity variance b. Direct labor rate and efficiency variances. (Input all amounts as positive values. Indicate the effect of each variance by selecting "F" for favorable, "U" for unfavorable, and "None" for no effect (i.e., zero variance).) Labor rate variance Labor efficiency variance c. Variable overhead rate and efficiency variances. (Input all amounts as positive values. Indicate the effect of each variance by selecting "F" for favorable, "U" for unfavorable, and "None" for no effect (i.e., zero variance).) Variable overhead rate variance Variable overhead efficiency Maritakx 2. Summarize the variances that you computed in (1) above by showing the net overall favorable or unfavorable variance for October. (Input all amounts as positive values. Indicate the effect of variance by selecting "F" for favorable, "U" for unfavorable, and "None" for no effect (i.e., zero variance).) Net variance 3. Pick out the two most significant variances that you computed in (1) above. (You may select more than one answer. Single click the box with the question mark to produce a check mark for a correct answer and double click the box with the question mark to empty the box for a wrong answer.) Materials price variance Materials quantity variance Variable overhead efficiency variance Labor rate variance Variable overhead rate variance Labor efficiency variance