The Gibbs Company makes and sells a single product. It uses a standard costing system in its operations. Budgeted production for September 2014 is 10,000 units.

The standard cost per finished unit is as follows:

Direct Materials:	2 metres	@ $36 per meter		$72.00
Direct Labour:	3 hours	@ $30 per hour		$90.00
Factory Overhead:
- Variable	3 hours	@ $4 per D.L. Hr	$12.00
- Fixed	3 hours	@ $8 per D.L.Hr	$24.00	$36.00

The management accountant has prepared the following statement for September:

	Actual
Production Units	9,000
Direct Labour Hours Worked	27,500
Direct Material Purchased (metres)	18,400
Direct Material Used (metres)	18,200
Costs Incurred:
Direct Material Purchased (18,400 x $35)	644,000
Direct Labour (27,500 x 29)	$797,500
Factory Overhead	$321,600

The material price variance is identified at time of purchase.

Required:

Calculate seven variances covering material, labour and overhead.

Your manager is worried about the integrity of current costing system. What might be the possible reasons for these variances?

Keeping in mind the principles of double entry bookkeeping & accrual based accounting prepare journal entries to record the material and labour variances.