Paynesville Corporation manufactures and sells a preservative used in food and drug manufacturing The company carries no inventories The master budget calls for the company to manufacture and sell 130,000 liters at a budgeted price of $300 per liter this year The standard direct cost sheet for one liter of the preservative follows Direct materials (2 pounds $19) $ 38 Direct labor (0 5 hours $54) 27 Variable overhead is applied based on direct labor hours The variable overhead rate is $170 per direct labor hour The fixed overhead rate (at the master budget level of activity) is $85 per unit All non manufacturing costs are fixed and are budgeted at $2 7 million for the coming year At the end of the year, the costs analyst reported that the sales activity variance for the year was $900,000 unfavorable The following is the actual income statement (in thousands of dollars) for the year Sales revenue $ 37,538 Less variable costs Direct materials 3,968 Direct labor 3,260 Variable overhead 9,980 Total variable costs $ 17,208 Contribution margin $ 20,330 Less fixed costs Fixed manufacturing overhead 1,200 Non manufacturing costs 1,380 Total fixed costs $ 2,580 Operating profit $ 17,750 During the year, the company purchased 206,000 pounds of material and employed 55,400 hours of direct labor Required a Compute the direct material price and efficiency variances b Compute the direct labor price and efficiency variances c Compute the variable overhead price and efficiency variances (For all requirements, enter your answers in whole dollars Indicate the effect of each variance by selecting F for favorable, or U for unfavorable If there is no effect, do not select either option ) THE EFFICIENCY VARIANCE IS INCORRECT FOR ALL THREE REQUIREMENTS, THE REST IS CORRECT PLEASE HELP a $ $ (54,000) 912,000 F Direct materials Price variance Efficiency variance b Direct labor Price variance Efficiency variance c Variable overhead Price variance Efficiency variance $ $ (268,400) 437,400 F $ $ (562,000) $ 1,377,000 F

The Answer is in the image, click to view ...

Answered step by step

Verified Expert Solution

Link Copied!

Question

1 Approved Answer

Posted on Sep 17, 2024

Paynesville Corporation manufactures and sells a preservative used in food and drug manufacturing. The company carries no inventories. The master budget calls for the company

Paynesville Corporation manufactures and sells a preservative used in food and drug manufacturing. The company carries no inventories. The master budget calls for the company to manufacture and sell 130,000 liters at a budgeted price of $300 per liter this year. The standard direct cost sheet for one liter of the preservative follows.


Direct materials	(2 pounds @ $19)	$	38
Direct labor	(0.5 hours @ $54)		27

Variable overhead is applied based on direct labor hours. The variable overhead rate is $170 per direct-labor hour. The fixed overhead rate (at the master budget level of activity) is $85 per unit. All non-manufacturing costs are fixed and are budgeted at $2.7 million for the coming year.

At the end of the year, the costs analyst reported that the sales activity variance for the year was $900,000 unfavorable.

The following is the actual income statement (in thousands of dollars) for the year.


Sales revenue	$	37,538
Less variable costs
Direct materials		3,968
Direct labor		3,260
Variable overhead		9,980
Total variable costs	$	17,208
Contribution margin	$	20,330
Less fixed costs
Fixed manufacturing overhead		1,200
Non-manufacturing costs		1,380
Total fixed costs	$	2,580
Operating profit	$	17,750

During the year, the company purchased 206,000 pounds of material and employed 55,400 hours of direct labor. Required: a. Compute the direct material price and efficiency variances. b. Compute the direct labor price and efficiency variances. c. Compute the variable overhead price and efficiency variances. (For all requirements, enter your answers in whole dollars. Indicate the effect of each variance by selecting "F" for favorable, or "U" for unfavorable. If there is no effect, do not select either option.)

THE EFFICIENCY VARIANCE IS INCORRECT FOR ALL THREE REQUIREMENTS, THE REST IS CORRECT. PLEASE HELP.

a. $ $ (54,000) 912,000 F Direct materials: Price variance Efficiency variance b. Direct labor: Price variance Efficiency variance c. Variable overhead: Price variance Efficiency variance $ $ (268,400) 437,400 F $ $ (562,000) $ 1,377,000 F