QUESTION 3 The Milano Manufacturing company's costing system has two direct cost categories: direct materials and direct manufacturing labour. Manufacturing overhead (both variable and fixed) is allocated to products on the basis of standard direct manufacturing labor hours (DLH). At the beginning of 2019, Milano adopted the following standards for manufacturing costs: Standards Input Cost per Output Unit Direct materials 5 kg at $5 per kg $25.00 Direct manufacturing labour 6 hrs @ $10 per hour $60.00 Manufacturing overhead: Variable $14 per Direct Labour Hour $84.00 Fixed $12 per Direct Labour Hour $72.00 Standard manufacturing cost $241.00 per output unit The denominator level for total manufacturing overhead per month in 2019 is budgeted 48,000 direct manufacturing labour hours. Budgeted units of production for January are 8000. Milano's flexible budget for January 2019 was based on this denominator level. The records for January indicated the following actual results: The denominator level for total manufacturing overhead per month in 2019 is budgeted 48,000 direct manufacturing labour hours. Budgeted units of production for January are 8000. Milano's flexible budget for January 2019 was based on this denominator level. The records for January indicated the following actual results: Direct materials purchased Direct materials used Direct manufacturing labour used Total actual manufacturing overhead Actual units of production 40,000 kgs at $5.20 per kgs 39,100 kgs 40,100 hours @ $15.60 per hour $900,000 7,600 output units REQUIRED: a. Calculate the total standard production costs (flexible budget) for direct materials, direct labour, variable overhead, fixed overhead and total costs based on the 7,600 units of output? Show all calculations. (5 marks) b. For the month of January, compute the following variances and indicate whether each is favourable or unfavourable: a. Direct materials price variance based on purchases (3 marks) b. Direct materials efficiency variance (3 marks) c. Direct manufacturing labour price variance (3 marks) d. Direct manufacturing labour efficiency variance (3 marks) e. Variable manufacturing overhead efficiency variance (3 marks) f. Total manufacturing overhead spending variance (3 marks) g. Production volume variance (3 marks) c. Provide a short statement to the CEO regarding the potential causes of the following variance and a practical recommendation to address each variance: direct materials efficiency variance labour efficiency variance variable overhead efficiency variance (4 marks) (4 marks) (4 marks)