Question 5 (23 marks) Cleanup Ltd produces an industrial chemical and uses a standard costing system to keep tight control over its costs. At the beginning of 2017, the following standard cost sheet (for one unit) was prepared: Direct materials (10kg@ $1.60/kg) Direct labour (0.75 hrs@ $18.00/hr) Fixed overhead (? /hr) Variable overhead (? /hr) Standard cost per unit $16.00 13.50 3.00 2.25 $34.75 Manufacturing overhead is allocated based on direct labour hours. The budgeted overhead rate is determined using a practical capacity of 72,000 units (the denominator level of activity) Actual results for 2017 were as follow Units produced: 70,000 Materials purchased: 744,000 kilograms at $1.50/kg Materials used in production: 736,000 kilograms Direct labour: 56,000 hours at $17.90/hour Total fixed overhead incurred: $214,000 Total variable overhead incurred: $175,400 The company isolates variances at the earliest point in time. Required: (For your variance calculations make sure to indicate if they are favourable or unfavourable) (a) Calculate the price and efficiency (quantity) variances for materials for the year and briefly explain the two variances you have calculated indicating if they would be investigated using 'management by exception (5 marks) (b) Calculate the labour rate (price) and labour efficiency variances for the year. (3 marks) (c) Calculate the fixed overhead budget (spending) and production volume variances and interpret the production volume variance you have calculated. (4 Marks) (d) Calculate the variable overhead spending and efficiency variances for the period