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(.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 (thousands of dollars) for the year.

Profit Variance Analysis

Manuf. Non manuf. Sales price Flexible Sales Activity Master

Actual variance variances variances budget variance budget

Sales Revenue $37,538

Less Variable costs

Direct Mat. 3,968

Direct labor 1,160

Variable oh 1,080

Total var. costs $6,208

Contr. margin 31,330

Less fixed costs

Fixed manuf oh 1,200

Non manf. Cost 1,380

Total fixed costs 2,580

Operating profit 28,750

Prepare a profit variance analysis? (enter your answers in thousands of 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.)