Super Car Ltd. manufactures high performance vehicles. The company purchased several new production machines aimed at reducing production breakdown. The installation of the new facility had significant impacts on the production processes.

While the new purchase was very expensive, management expects the new machinesto reduce the labour time required by a substantial amount. Management also expects the new machines to reduce the direct material waste. In addition, the new machines require a more highly skilled labour force, but they are expected to ramp up the production volume to the meet the increasing market demand for high performance vehicles in recent times.

The cost variance report has been prepared for the month of June. This report is the first full month report after the new machines were installed.

Super Car Ltd's June Cost Variance Report

Direct material:

Direct material price variance150U

Direct material quantity variance3 900F

Direct labour:

Direct labour rate variance4 800U

Direct labour efficiency variance14 000F

Manufacturing overhead:

Variable overhead spending variance8 000U

Variable overhead efficiency variance10 000 F

Fixed overhead budget variance30 000 U

Fixed overhead volume variance20 000 F

The company budgets and applies manufacturing overhead on the basis of direct labour hours.

Required:

Explain how the variances in the above report are likely to have been influenced by the purchase and the use of the new machines. Provide a brief explanation of how each variance may have been affected(word limit: max 40 lines).