STANDARD COSTING Problem 1 The Gold plant of Melbourne's Small Motor Division produces a major sub-assembly for motorcycles. The plant uses a standard costing system for production costing and control. The standard cost sheet for the sub-assembly follows: Direct materials (7 1bs. @ P6) P42 Direct labor (2 hrs. @ P12) 24 Variable overhead (2 hrs. @ P10) 20 Fixed overhead (2 hrs. @ P6) 12 Standard unit cost P98 During the year, the Gold plant had following actual production activity: a. Production of sub-assemblies totaled 70,000 units. b. A total of 465,000 pounds of materials was purchased at P5.80 per pound. c. There were 26,400 pounds of materials in beginning inventory (carried at $6 per pound). There was no ending inventory. d. The company used 150,000 direct labor hours at a total cost of P1,950,000. e. Actual fixed overhead totaled $913,000. Actual variable overhead totaled P1,470,000. The Gold plant's practical activity is 75,000 units per year. Standard overhead rates are computed based on practical activity measured in standard direct labor hours. Requirements: 1. Compute the materials price and usage variances. 2. Compute the labor rate and efficiency variances. 3. Compute the variable overhead spending and efficiency variances. 4. Compute the fixed overhead spending and volume variances. Interpret the volume variance