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Paynesville Corporation manufactures and sells a preservative used in food and drug manufacturing. The company carries no Inventorles. The master budget calls for the company
Paynesville Corporation manufactures and sells a preservative used in food and drug manufacturing. The company carries no Inventorles. The master budget calls for the company to manufacture and sell 106,000 Ilters at a budgeted price of $120 per liter this year. The standard direct cost sheet for one Iiter of the preservative follows. Varlable overhead is applied based on direct labor hours. The varlable overhead rate is $50 per direct-labor hour. The fixed overhead rate (at the master budget level of activity) is $25 per unit. All non-manufacturing costs are fixed and are budgeted at $1.5 million for the coming year. At the end of the year, the costs analyst reported that the sales activity varlance for the year was $396,000 unfavorable. The following is the actual Income statement (In thousands of dollars) for the year. During the year, the company purchased 182,000 pounds of materlal and employed 43,400 hours of direct labor. a. Compute the direct material price and efficlency varlances. b. Compute the direct labor price and efficlency varlances. c. Compute the varlable overhead price and efficlency varlances. (For all requlrements, enter your answers In whole dollars. Indlcate the effect of each varlance by selecting "F" for favorable, or "U" for unfavorable. If there is no effect, do not select elther option.)
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