Suppose Company A plans to produce and sell 5.000 units of a specific product.

• According to previous research results, 10 kg of direct material needed per unit. During the pre-negotiations with the suppliers the cost of 1 kg of direct material is estimated to be 15 TL.
• According to previous research results, 6 hours of direct labor needed per unit. During the pre-negotiations with the labor unions the hourly wage of direct labor is estimated to be 50 TL.
• The managers decided to calculate the predetermined overhead rates based on direct labor hours. Based on previous data, variable overhead cost per the coming period is estimated to be 90.000 TL. Fixed overhead cost is 120.000 TL at the predetermined production capacity.
• At the end of the period, it is found out that 4.000 items have been produced and sold upon decreased demand. 8 kg of direct material and 7 hours of direct labor were used per item produced. Cost of direct material per kg and hourly wage averaged to be 16 and 40 TL respectively. Actual manufacturing overhead costs for the whole period have accumulated to 86.800 TL for variable overhead and 106.400 TL for fixed overhead costs.

Notes:

1. %70 of Total Manufacturing Cost becomes 152. Finished Goods.
2. %20 of Total Manufacturing Cost is sold.

Required:

1. Calculate price and efficiency variances of both direct material and direct labor.
2. Calculate manufacturing overhead variances.