The Ebonie Manufacturing Companys costing system has two direct cost categories: direct materials and direct manufacturing labour. Manufacturing overhead (both variable and fixed) is allocated to products on the basis of standard direct manufacturing labour-hours (DLH). At the beginning of 2022/2023, Ebonie adopted the following standards for its manufacturing costs: Standards Input Cost per Output Unit Direct Materials 3.00 kg at $ 5.00 per kg $ 15.00 Direct Manufacturing Labour 5.00 hrs at $ 15.00 per hr $ 75.00 Manufacturing Overhead Variable $ 6.00 per DLH $ 30.00 Fixed $ 8.00 per DLH $ 40.00 Standard Manufacturing Cost per Unit $ 160.00 The denominator level for total manufacturing overhead per month in 2022/2023 is 40,000 direct manufacturing labour-hours. Ebonie Manufacturings flexible budget for January 2023 was based on this denominator level. The records for January indicated the following: Actual Costs Direct Materials Purchased 25,000.00 kg $ 5.20 per kg Direct Materials Used 23,100.00 kg Direct Manufacturing Labour 40,100.00 Hours $ 14.60 per hr Total Actual Manufacturing Overhead (Variable & Fixed) $ 600,000.00 Actual Production 7,800.00 Output Units.

1 Prepare a schedule of total standard manufacturing costs for the 7800 output units in January.

2 For the month of January 2023, calculate the following variances, indicating whether each is favourable (F) or unfavourable (U), in good format with workings:

a Direct materials price variance, based on purchases b Direct materials efficiency variance

c Direct manufacturing labour price variance

d Direct manufacturing labour efficiency variance e Total manufacturing overhead spending variance

f Variable manufacturing overhead efficiency variance

g Production-volume variance.

3 Discuss at least 2 possible reasons for each of the above variances.

4 Explain the importance of performing variance analysis as part of the management accounting function?

5 Explain how management will use the results of this variance analysis.