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Paynesville Corporation manufactures and sells a preservative used in food and drug manufacturing. The company carries...

Paynesville Corporation manufactures and sells a preservative used in food and drug manufacturing. The company carries no inventories. The master budget calls for the company to manufacture and sell 128,000 liters at a budgeted price of $285 per liter this year. The standard direct cost sheet for one liter of the preservative follows.

Direct materials (2 pounds @ $18) $ 36
Direct labor (0.5 hours @ $52) 26


Variable overhead is applied based on direct labor hours. The variable overhead rate is $160 per direct-labor hour. The fixed overhead rate (at the master budget level of activity) is $80 per unit. All non-manufacturing costs are fixed and are budgeted at $2.6 million for the coming year.

At the end of the year, the costs analyst reported that the sales activity variance for the year was $858,000 unfavorable.

The following is the actual income statement (in thousands of dollars) for the year.

Sales revenue $ 35,098
Less variable costs
Direct materials 3,718
Direct labor 3,110
Variable overhead 9,230
Total variable costs $ 16,058
Contribution margin $ 19,040
Less fixed costs
Fixed manufacturing overhead 1,190
Non-manufacturing costs 1,370
Total fixed costs $ 2,560
Operating profit $ 16,480


During the year, the company purchased 204,000 pounds of material and employed 54,400 hours of direct labor.


Required:

a. Compute the direct material price and efficiency variances.
b. Compute the direct labor price and efficiency variances.
c. Compute the variable overhead price and efficiency variances.

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