2. HiFlux Co. manufactures a control valve used in sophisticated machinery. The firm uses a standard costing system and its overhead application rate is based on machine hours. The planned output for the year 201:: is 72,000 units requiring 350,000 machine hours. The company is able to schedule production uniformly throughout the year. It turns out that a total of 6,600 valves requiring 31,500 machine hours were actually produced in March 201x. Appended below is a performance report on factory overhead and other production data prepared by the firm's new accounts assistant Soo Mes Sih for March 201x: Performance Report on Factory Overhead for March 2011:: Actual Monthly Flexible Cost incurred Budget at Budget at in March 30,000 36,000 Variances Indirect materials 11,100 10,200 12,240 900 U -su Maintenance 5,550 5, 100 6,120 Su pervision 5,250 5,400 5,400 Utilities 5,400 4,500 4,500 900 U 0 Depreciation 8,400 8,400 8,400 U: Unfavourable; F: Favourable Other production Data: Planned yearly production 72,000 units Planned yearly machine hours required 360,000 machine hours Actual production in March 6,600 units Actual machine hours used 31,500 hours Upon receiving the report, the company CEO commented: "Although the gures in the report looks like they were calculated correctly, the production supervisors suspect that the reported variances might not accurately reflect the company's operations.\