Morse Inc. manufactures a single product, LWL. Morse uses budgets and standards in its planning and control functions. Morse makes use of its standards in order to derive their budgeted costs per unit. For example, Exhibit A provides information on the budgeted costs per unit. When determining direct material costs for the planning budget income statement, the $9 budgeted direct material cost per unit of LWL would be used in the calculation.

Exhibit A

	Budgeted (Standard) Costs Per Unit of LWL
Direct materials: 3 pounds at $3 per pound	$9
Direct labor: 0.2 direct labor hours at $15 per hour	3
Variable overhead: 0.2 direct labor hours at $10 per hour	2
Fixed overhead: 0.2 direct labor hours at $20 per hour	4
Total budgeted (standard) cost per unit of LWL	$18

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The budgeted (standard) fixed manufacturing overhead cost per hour is calculated based on a denominator level of activity of 100,000 direct labor hours.

The planning budget income statement is based on the expectation of selling 500,000 units of LWL. The budgeted sales price is $30 per unit, and total budgeted fixed selling and administrative costs are $2,500,000. There are no variable selling and administrative costs in this firm.

The company actually produced and sold 470,000 units this year. The company never has a beginning or ending raw materials inventory, because it uses all raw materials purchased. Also, the company never has a beginning or ending finished goods inventory. Everything produced in the year is sold in that same year.

The actual income statement for the year is provided in Exhibit B.

Exhibit B

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Morse Inc.

Actual Income Statement

Sales:
470,000 units produced and sold at $32	$15,040,000
Less Variable Costs:
Direct materials (1,316,000 pounds at $3.5 per pound)	4,606,000
Direct labor (117,500 direct labor hours at $10/hr.)	1,175,000
Variable manufacturing overhead	1,468,750
Contribution margin	7,790,250
Less Fixed Costs:
Fixed manufacturing overhead costs	2,350,000
Fixed selling and administrative costs	2,360,000
Net operating income	$ 3,080,250

Prepare a very detailed manufacturing cost variance analysis (e.g., calculate the material price variance and quantity variance; the labor rate variance and efficiency variance; the variable overhead rate variance and efficiency variance; and the fixed manufacturing overhead budget variance and volume variance). All variances should be marked with either an F for favorable or U for unfavorable. Show your calculations.