answer the highlighted question **Variance Analysis Exercise****Context:**A company produces and sells a single product. Here's an analysis related to their manufacturing costs and variances for the year.**Standard Cost Card - Per Unit of Product:**- Direct materials, 2 feet at $8.45: $16.90- Direct labor, 1.4 hours at $8: $11.20- Variable overhead, 1.4 hours at $2.50: $3.50- Fixed overhead, 1.4 hours at $6: $8.40- Total standard cost per unit: $40.00**Additional Information for the Year:**- Units produced: 30,000- Material purchased: 64,000 feet at $8.55/foot- Direct labor-hours worked: 45,000 at $7.80/hour**Manufacturing Overhead Costs:**- Denominator activity level: 35,000 direct labor-hours- Budgeted fixed overhead costs: $210,000- Actual variable overhead costs: $108,000- Actual fixed overhead costs: $211,800**Required Calculations:**a) **Direct Materials Price and Quantity Variances:** - **DMP:** 8.45 - 8.55 = -0.1 x 64,000 = [-$6,400] - **DQV:** 30,000 x 2 = 60,000 - 64,000 = -4,000 x 8.45 = [-$33,800]b) **Direct Labor Rate and Efficiency Variances:** - **DLR:** 8 - 7.80 = 0.2 x 45,000 = [$9,000] - **DLE:** 1.4 x 30,000 = 42,000 - 45,000 = -3,000 x 8 = [-$24,000]c) **Variable Overhead Spending and Efficiency Variances:** - **VOSV:** (2.5 - (108,000/45,000)) x 45,000 = [$4,500] - **VOEV:** 1.4 x 30,000 = 42,000 - 45,000 = -3,000 x 2.5 = [-$7,500]d) **Fixed Over

The study of variances between actual behavior and predicted or planned behavior in budgeting or…

2. Wonderful! Not only did our salespeople do a good job in meeting the sales budget this year, but our production people did a good job in controlling costs as well," said Kim Clark, president of Martell Company. "Our $18,000 overall manufacturing cost variance is only 1.5% of the standard $1,200,000 standard cost of products sold during the year. That's well within the 3% parameter set by management for acceptable variances. It looks like everyone will be in line for a bonus this year." The company produces and sells a single product. A standard cost card for the product follows: Standard Cost Card - Per Unit of Product Direct materials, 2 feet at $8.45 Direct labor, 1.4 hours at $8 ..... Variable overhead, 1.4 hours at $2.50 ...... Fixed overhead, 1.4 hours at $6 Standard cost per unit.... $16.90 11.20 3.50 8.40 $ 40.00 The following additional information is available for the year just completed: I The company manufactured 30,000 units of product during the year. A total of 64,000 feet of material was purchased during the year at a cost of $8.55 per foot. All of this material was used to manufacture the 30,000 units. There were no beginning or ending inventories for the year. The company worked 45,000 direct labor-hours during the year at a cost of $7.80 per hour. Overhead is applied to products on the basis of direct labor-hours. Data relating to manufacturing overhead costs follows: Denominator activity level (direct labor-hours) Budget fixed overhead costs (from the overhead flexible budget) ....... Actual variable overhead costs incurred Actual fixed overhead costs incurred 35,000 .$210,000 .***** 108,000 211,800 Required: a) Compute the direct materials price and quantity variances for the year. DMP: 8.45-8.55-0.1 X 64,000 = [- $6,400] DQV: 30000 X 2= 60000-64000-4000 X 8.45 - $33800] b) Compute the direct labor rate and efficiency variances for the year. DLR+ 8-7.80=2 X 45000 $9000] DLE: 1.4 X 30000=42,000-45000-3000 X 8= [-24000] c) Compute the variable overhead spending and efficiency variances for the year. VOSV: (2.5-(108000/45000) X 45000 - [$4500] VOEV: 1.4 X 30000=42,000-45000-3000 X 2.5 = [-$7500] d) Compute the fixed overhead budget and volume variances for the year. FOV: 42000 X 6-252,000-210000 [$42000] e) Total the variances you have computed and compare the net with the $18,000 mentioned by the president. Do you agree that bonuses should be given to everyone for good cost control during the year? Explain.