Portland Company's Ironton Plant produces precast ingots for industrial use. Carlos Santiago, who was recently appointed general manager of the Ironton Plant, has just been handed the plant’s contribution format income statement for October. The statement is shown below:

Budgeted Actual

Sales (6,000 ingots) $ 265,000 $265,000

Variable expenses:

Variable cost of goods sold* 95,580 112,700

Variable selling expenses 14,000 14,000

Total variable expenses 109,580 126,700

Contribution margin 155,420 138,300

Fixed expenses:

Manufacturing overhead 63,000 63,000

Selling and administrative 78,000 78,000

Total fixed expenses 141,000 141,000

Net operating income (loss) $ 14,420 $ (2,700)

*Contains direct materials, direct labor, and variable manufacturing overhead.

Mr. Santiago was shocked to see the loss for the month, particularly because sales were exactly as budgeted. He stated, "I sure hope the plant has a standard cost system in operation. If it doesn't, I won't have the slightest idea of where to start looking for the problem."

The plant does use a standard cost system, with the following standard variable cost per ingot:

Standard Quantity or Hours Standard Price

or Rate Standard Cost

Direct materials 3.9 pounds $ 2.30 per pound $ 8.97

Direct labor 0.8 hours $ 6.90 per hour 5.52

Variable manufacturing overhead 0.6 hours* $ 2.40 per hour 1.44

Total standard variable cost $ 15.93

*Based on machine-hours.

During October the plant produced 6,000 ingots and incurred the following costs:

a. Purchased 28,400 pounds of materials at a cost of $2.75 per pound. There were no raw materials in inventory at the beginning of the month.

b. Used 23,200 pounds of materials in production. (Finished goods and work in process inventories are insignificant and can be ignored.)

c. Worked 5,400 direct labor-hours at a cost of $6.60 per hour.

d. Incurred a total variable manufacturing overhead cost of $10,920 for the month. A total of 3,900 machine-hours was recorded.

It is the company’s policy to close all variances to cost of goods sold on a monthly basis.

Required:

1. Compute the following variances for October:

a. Direct materials price and quantity variances. (Input all amounts as positive values. Leave no cells blank - be certain to enter "0" wherever required. Indicate the effect of each variance by selecting "F" for favorable, "U" for unfavorable, and "None" for no effect (i. e., zero variance). Omit the "$" sign in your response.)

Materials price variance $

Materials quantity variance $

b. Direct labor rate and efficiency variances. (Input all amounts as positive values. Leave no cells blank - be certain to enter "0" wherever required. Indicate the effect of each variance by selecting "F" for favorable, "U" for unfavorable, and "None" for no effect (i. e., zero variance). Omit the "$" sign in your response.)

Labor rate variance $

Labor efficiency variance $

c. Variable overhead rate and efficiency variances. (Input all amounts as positive values. Do not round your intermediate calculations. Leave no cells blank - be certain to enter "0" wherever required. Indicate the effect of each variance by selecting "F" for favorable, "U" for unfavorable, and "None" for no effect (i. e., zero variance). Omit the "$" sign in your response.)

Variable overhead rate variance $

Variable overhead efficiency variance $

2a. Summarize the variances that you computed in (1) above by showing the net overall favorable or unfavorable variance for October. (Input the amount as a positive value. Leave no cells blank - be certain to enter "0" wherever required. Indicate the effect of each variance by selecting "F" for favorable, "U" for unfavorable, and "None" for no effect (i. e., zero variance). Omit the "$" sign in your response.)