Topline Surf Boards manufactures a single product. The standard cost of one unit of this product is as follows:

Direct materials: 2 metres at $3 per metre $ 6.00 Direct labour: 1 hour at $4.50 per hour 4.50 Variable manufacturing overhead: 1 hour at $3 per hour 3.00 Fixed manufacturing overhead: 1 hour at $5 per hour 5.00 Total standard variable cost per unit $18.50

During October, 6,000 units were produced. Selected data relating to the months production follow: There was no beginning inventory of raw materials. The variable and fixed manufacturing overhead rates are based on direct labour-hours. Required: Materials purchased: 20,000 metres at $2.85 per metre $57,000 Materials used in production: 12,650 metres Direct labour: ? hours at $ ? per hour $27,950 Variable manufacturing overhead cost incurred $20,475 Variable manufacturing overhead efficiency variance $ 1,500 U Denominator level of activity for October 6,200 hours Fixed manufacturing overhead budget variance 1,000 U

1. For direct materials: a. Compute the price and quantity variances for October. b. Prepare journal entries to record activity for October. 2. For direct labour: a. Compute the rate and efficiency variances for October. b. Prepare a journal entry to record labour activity for October. 3. For variable manufacturing overhead: a. Compute the spending variance for October, and verify the efficiency variance given above. b. If manufacturing overhead is applied to production on the basis of direct labour-hours, is it possible to have a favourable direct labour efficiency variance and an unfavourable variable overhead efficiency variance? Explain.