Softcushion shock absorber Ltd. manufactures automobile shock absorbers. The company automated production process aimed at reducing production breakdown. The installation of the new machines had a significant impact on the production processes. While the new set up was very capital intensive, management expects the new machines to reduce the required labour time significantly. Management also expects the new machines to reduce the wastage in direct material. In addition, the new machines require a more highly skilled labour force, but they are expected to ramp up the production volume to meet the increasing market demand for new technology shock absorbers in recent times. The cost variance report has been prepared for the month of January . This report is the first full month report after the new machines were installed. Softcushion Shockabsorber Ltd January Cost Variance Report Direct material: Direct material quantity variance 1 950 F Direct labour: Direct labour rate variance 2 400 U Direct labour efciency variance 7 000 F Manufacturing overhead: Variable overhead spending variance 4 000 U Variable overhead efciency variance 5 000 F Fixed overhead volume variance 10 000 F The company budgets and applies manufacturing overhead on the basis of direct labour hours. Required: Explain the impact of the new production process on the variances in the above report. Comment on the variances and how each of the variances may have been impacted. (6 marks)