The Emerson Division of Golding Company produces small kitchen appliances. The company uses a standard cost system for production costing and control. The standard cost sheet for its most popular product, a toaster, is given below.

Direct materials (2.5 lbs/unit @ $4.00/lb) $10.00
Direct labor (0.7 hrs/unit @ $10.50/hr) 7.35
Variable overhead (0.7 hrs/unit @ $6.00/hr) 4.20
Fixed overhead (0.7 hrs/unit @ $3.00/hr) 2.10
Standard cost per unit $23.65

Emerson produces all of its toasters in a single plant. Normal activity is 45,000 units per year. Standard overhead rates are computed based on normal activity measured in standard direct labor hour. During the year, Emerson experienced the following activity relative to the production of toasters.
a. Production of toasters totaled 50,000 units.
b. A total of 130,000 pounds of raw materials was purchased at $3.70 per pound.
c. There were 10,000 pounds of raw materials in beginning inventory (carried at $4 per pound). There was no ending inventory.
d. The company used 36,500 direct labor hours at a total cost of $392,375.
e. Actual variable overhead totaled $210,000.
f. Actual fixed overhead totaled $95,000.

Required:
1. Compute the materials price and usage variances.
2. Compute the labor rate and efficiency variances.
3. Compute the variable overhead spending and efficiency variances.
4. Compute the fixed overhead spending and volume variances. Interpret the volume variance (what does it indicate).
5. Prepare journal entries for the following:
a. the purchase of raw materials
b. the issuance of raw materials to production (Work in process)
c. the addition of labor to work in process
d. the application of overhead (variable and fixed) to work in process
e. the incurrence of actual overhead costs
f. closing out of variances to cost of goods sold
6. When preparing the journal entries identify a possible reason for the variance. Do not state that the company paid more or less than budgeted or the company used more or less. Provide a reason.