Standard costs per drum of product manufactured were as follows: Materials
10 gallons of raw materials $20
1 empty drum $1
Total Materials Costs $21
Direct labor (1 hour) $7
Fixed factory overhead (per direct
labor hour) $4
Variable factory overhead (per
direct labor hour) $6 Costs incurred during December were as follows:
Raw materials: 600000 gallons were purchased at a cost of $1150000
700000 gallons were used
Empty drums: 85000 drums were purchased at a cost of $85000
60000 drums were used
Direct Labor: 65000 hours were worked at a cost of $470000
Factory overhead:
Depreciation of building and machinery: $230000
Supervision and indirect labor: $360000
Other factory overhead; $76500
Total factory overhead: $666500 The fixed overhead budget for the December level of production was $275000
Normal capacity is $68750 direct labor hours Prepare a schedule computing the following variances for December: (1) Materials price variance (computed at the time of purchase)
(2) Materials usage variance (quantity)
(3) Labor rate variance
(4) Labor usuage (efficiency) variance
(5) Factory overheadusing the three-way method Indicate whether each variance is favorable or unfavorable