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Tuna Company set the following standard unit costs for its single product.


Direct materials (25lbs. @ $4 per lb.)

$100.00

Direct labor (6hrs. @ $8 per hr.)

48.00

Factory overhead variable (6 hrs. @ $5 per hr.)

30.00

Factory overhead fixed (6 hrs. @ $7 per hr.)

42.00

Total standard cost

$220.00


They predetermined overhead rate is based on a planned operating volume of 80% of the productive capacity of 60,000 units per quarter. The following flexible budget information is avaliable.



Operating Levels


70%

80%

90%

Production in units

42,000

48,000

54,000

Standard direct labor hours

252,000

288,000

324,000

Budgeted overhead

$2,016,000

$2,016,000

$2,016,000

Variable factory

overhead

$1,260,000

$1,440,000

$1,620,000


During the current quarter, the company operated at 70% of capacity and produced 42,000 units of product; actual direct labor totaled 250,000 hours. Units produced were assigned the following standard costs:


Direct materials (1,050,000 lbs. @ $4 per lb.)

$4,200,000

Direct labor (252,000 hrs. @ $8 per hr.)

2,016,000

Factory overhead (252,000 hrs @ $12 per hr.)

3,024,000

Total standard cost

$ 9,240,000


Actual costs incurred during the current quarter follow:


Direct materials (1,000,000 lbs. @ $4.25)

$ 4,250,000

Direct labor (250,000 hrs @ $7.75)

1,937,500

Fixed factory overhead costs

1,960,000

Variable factory overhead costs

1,200,000

Total actual costs

$ 9,347,500


Required:


1. Compute the direct materials cost variance, including its price and quantity variances

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