The following is the standard cost card for GH Inc's only product:

Direct material, 3 oz. at $2.00/oz.$6.00

Direct labour, 0.5 hours at $20.00/DLH10.00

Variable MOH, 0.5 hours at $25.00/DLH12.50

Fixed MOH, 0.5 hours at $15.00/DLH7.50

Standard cost per unit$36.00

The company manufactured and sold 7,000 units of product during the year. A total of 25,000 oz. of material was purchased during the year at a total cost of $56,250. GH used 24,500 oz. of material to make the 7,000 units.

The company worked 3,000 direct labour hours during the year at a cost of $19.75 per hour. Overhead cost is applied to products on the basis of direct labour hours. The denominator activity level (direct labour hours) was 10,000 hours. Budgeted fixed overhead costs as shown on the flexible budget were $75,000, while actual fixed overhead costs were $82,500. Actual variable overhead costs were $80,000.

Required:

a) Compute the direct materials price and quantity variances for the year.

b) Compute the direct labour rate and efficiency variances for the year.

c) Compute the variable overhead spending and efficiency variances for the year.

d) Compute the fixed overhead budget and volume variances for the year.

e) Which variance should be reviewed first?