The Mike's Brand Packaging segment manufactures sets of hand painted rolls of wrapping paper called "Paper with Love."They have seen the sales of these sets more than triple in the last year and has increased their production along while continuing their normal production activity and are nearing capacity.The company uses cost and quantity standards to monitor and control costs.

The standards that have been set for one set of "Paper with Love" are 20 minutes of direct labor per set at an hourly cost of $9.00 per hour.Mike's uses a PDOHR for applying overhead to segments based on ounces of direct material used and has a standard for overheard of $1.50 per direct material ounce.Expected direct materials are 4 ounces at a cost of $8.00 per pound.

For the month, the actual production was [$800] sets which retail for $25 each.For the month, Mike's Brand Packaging incurred 360 hours of Direct labor for a total cost of $3,375.Direct Materials purchased were 380 pounds for a total cost of $4,800, however only 260 pounds were used in this month's production (unused direct materials can be stored and used in the following month production).For the month the segment had total overhead costs of $5,200.

Be sure to convert hours to minute (60 minutes in an hour) and pounds to ounces (16 ounces in a pound).

Required:

4.For direct materials, assume that any direct materials purchased, but not used are inventoried and able to be used in the future.Break down the variance in direct materials into the following, be sure to show your work and identify if the variance is favorable or unfavorable:

a.Price Variance

b.Quantity Variance

c.Describe the impact on the variances (if any) of the fact that not all direct material purchased was used this month in production.

5.Break down the difference in direct labor costs into the following, be sure to show your work and identify if the variance is favorable or unfavorable:

a.Labor Rate Variance

b.Labor Efficiency Variance

c.Provide a reasonablebusiness reasonwhy the company might have had these labor variances (both rate and efficiency) andone recommendationas to what management could do to bring the labor back in line with the standard.

6.Prepare the following overhead variances for the month, be sure to show your work and identify if the variance is favorable or unfavorable:

a.Variable Overhead Rate Variance

b.Variable Overhead Efficiency Variance

c.Provide a reasonablebusiness reasonwhy the company might have had these overhead variances and who is responsible for ensuring that they are brought in line with standard or if the standard should be adjusted (and why).