The Clayton Company uses a standard cost system in which manufacturing overhead costs are applied to units of the company's single product on the basis of direct labor-hours (DLHs). The standard cost card for the product follows:

The Clayton Company uses a standard cost system in which manufacturing overhead costs are applied to units of the company's single product on the basis of direct labor-hours (DLHs). The standard cost card for the product follows:

Direct Materials	$14
Direct Labor, 1.5 DLHs at $8 per DLH	12
Variable Overhead, 1.5 DLHs at $2 per DLH	3
Fixed Overhead, 1.5 DLHs at $6 per DLH	9
Standard Cost Per Unit	$38

The following data pertain to last year's activities:

• The company manufactured 18,000 units of product during the year. A total of 70,200 yards of aterial was purchased during the year at a cost of $3.75 per yard. All of this material was used to manufacture the 18,000 units.
• The company worked 29,250 direct labor-hours during the year at a cost of $7.80 per hour.
• The denominator activity level was 22,500 direct labor-hours.
• Budgeted fixed manufacturing overhead costs were $135,000 while actual manufacturing overhead costs were $133,200.
• Actual variable manufacturing overhead costs were $61,425.

Required:

1. Compute the direct materials price and quantity variances for the year.

   Direct Materials Price Variance = AQ(AP-SP) 70,200 ($3.75 - $3.50 = $17,550) UDirect Materials Quantity Variance = SP(AQ-SQ) $3.50(70,200 - 72,000*) = $6,300 F  *18,000 units x 4 yards per unit = 72,000 yards

2. Compute the direct labor rate and efficiency variances for the year.

   Direct Labor Rate Variance = AH(AR-SR) 29,250($7.80 - $8.00) = $5,850 FDirect Labor Efficiency Variance = SR(AH-SH) $8.00(29,250 - 27,000*) = $18,000 U  *18,000 units x 1.5 DLHs per unit = 27,000 DLHs

3. Compute the following for overhead:
   1. The variable overhead spending and efficiency variances for the year.

      Spending Variance = (AH x AR) - (AH x SR) ($61,425 ) - (29,250 DLHx x $2 per DLH) = $2,925 UEfficiency Variance = (AH x SR) - (SH x SR) (29,250 DLHs x $2 per DLH) - (27,000 DLHs x $2 per DLH) = $4,500 U

   2. The fixed overhead budget and volume variances for the year.

      Budget Variance = Actual FOH - Flexible budget FOH $133,200 - $135,000 = $1,800 FVolume Variance = Fixed portion of POR x (Denominator Hours - Standard Hours allowed) $6 per DLH (22,500 DLHs - 18,000 units x 1.5 DLHs per unit) = $72,000 F