Sunland, Inc. produces and sells lumbar support cushions for office chairs using a special foam that molds to a person's back. Since all products are made to order, the only inventory the company maintains is raw materials. Thus, all costs of production are recognized in the period in which they are incurred. The following annual performance report was prepared from the company's accounting records: Actual Budget Variance Units sold 14,800 15,000 200 U Sales revenue $3,182,000 $3,150,000 $32,000 F Cost of goods sold 2,064,830 2,075,000 (10,170) F Gross margin 1,117,170 1,075,000 42,170 F Selling and administrative expenses 288,625 290,000 (1,375) F Operating income $828,545 $785,000 $43,545 F The following fixed costs are included in these amounts. Actual Budget Cost of goods sold $195,000 $200,000 Selling and administrative expenses 140,000 140,000 Hank Martinez, Sunland CFO, used the following standard cost card in preparing the budget and thought he had done a good job estimating production and sales. He wonders why the variable cost of goods sold deviated from that budget. Standard Quantity Total Cost per Unit Standard Price per Unit Direct material 5 yards $10 per yard $50 Direct labor 2.5 hours $16 per DLH 40 Variable overhead 2.5 hours $14 per DLH 35 $125 Actual variable costs incurred during the year were as follows. Direct materials purchased and used (78,400 yards @ $9.80) $768,320 Direct labor cost incurred (37,240 DLH @ $15.50) 577,220 Variable overhead costs incurred 524,290 $1,869,830 Actual Results Flexible Budget Variance Unit sales 14,800 0 i Not Applicable Sales revenue $ 3,182,000 $ 74,000 Favorable Less Variable expenses Cost of goods sold 1,869,830 i 19,830 Unfavorable Selling and administrative 148,625 625 Unfavorable Total variable expenses 2,018,455 i 20,455 Unfavorable Contribution margin 1,163,545 53,545 Favorable Less V Fixed expenses Cost of goods sold 195,000 i (5,000) Favorable Selling and administrative 140,000 i 0 Not Applicable Total fixed expenses 335,000 i (5,000) Favorable Flexible Budget Sales Volume Variance Static Budget 14,800 200 Unfavorable 15,000 $ 3,108,000 $ 42,000 Unfavorable $ 3,150,000 1,850,000 i 25.000 Favorable 1,875,000 i >> 148,000 i 2,000 Favorable 150.000 i 1,998,000 i 27,000 Favorable 2,025,000 i 1,110,000 15,000 Unfavorable 1,125,000 200,000 i i Not Applicable 200,000 i 140,000 i i Not Applicable 140,000 i V 340,000 i i Not Applicable 340,000 i Less Fixed expenses Cost of goods sold 195,000 i (5,000) Favorable Selling and administrative 140,000 i 0 Not Applicable Total fixed expenses 335,000 i (5,000) Favorable Operating income $ 828.545 $ 58,545 Favorable b-d) (b) Calculate the direct materials price and quantity variances. (If variance is zero, select "Not Applicable" and enter O for the amounts. Round answers to 0 decimal places, e.g. 5,275.) $ Direct material price variance $ Direct material quantity variance 1,748,000 27.UUU Favorapie Z.UZS,UUU 1,110,000 15,000 Unfavorable 1,125,000 v 200,000 i i Not Applicable 200,000 i 140,000 i i Not Applicable 140,000 i 340,000 i i Not Applicable 340,000 i $ 770,000 $ 15,000 Unfavorable $ 785,000 (b-d) (b) Calculate the direct materials price and quantity variances. (If variance is zero, select "Not Applicable" and enter O for the amounts. Round answers to 0 decimal places, e.g. 5,275.) (b) Calculate the direct materials price and quantity variances. (If variance is zero, select "Not Applicable" and enter O for the amounts. Round answers to O decimal places, e.g. 5,275.) $ Direct material price variance $ Direct material quantity variance (c) Calculate the direct labor rate and efficiency variances. (If variance is zero, select "Not Applicable" and enter O for the amounts. Round answers to O decimal places, e.g. 5,275.) $ Direct labor rate variance $ Direct labor efficiency variance Unfavorable t "Not Applicable" and enter O for the (d) Calculate the variable overhead spending and efficiency variances. (If amounts. Round answers to 0 decimal places, e.g. 5,275.) Favorable Not Applicable $ Variable overhead spending variance $ Variable overhead efficiency variance