ABB Inc. has actual and budgeted operating income (be noted that, for simplicity, we do not include non-manufacturing costs) for year 2007 as follows: Actual Budget Sales volume 900 units 1,000 units Selling price $120 $100 Sales $108,000 $100,000 - Variable costs Direct materials 27,000 20,000 Direct labor 18,000 30,000 Variable OH 13,500 10,000 Total variable 58,500 60,000 Contribution margin 49,500 40,000 - Fixed OH 23,000 20,000 Operating income 26,500 20,000 Based on the budget, ABB has a standard cost card as follows: Budgeted input units for 1 unit of FG (Standard input quantity) Budgeted input price (Standard price) Budgeted input cost for 1 unit of FG (Standard unit cost) Direct material 2 pounds $10 per pound $? Direct labor 3 hours $10 per hour $? Variable OH 2.5 machine hours $ 4 per MH $? Fixed OH $ 20,000 in total for production capacity of 1,000 units The actual inputs of DM, DL and V.OH are as follows: Direct materials purchased and used: 1,350 pounds Price per pound: $20 Direct labor hours: 2250 hours Labor rate: $8 Variable OH: 4500 machine hours V.OH application rate: $3 per machine hour Required: 1. Prepare a flexible budget 2. Conduct variance analysis 3. VOH and FOH are allocated based on machine hours, calculate VOH rate, FOH rate, VOH applied, and FOH applied. 4. Make journal entries under Standard Costing system a. purchase of direct materials b. issue of direct materials into production c. use of direct labor in production d. actual OH (variable and fixed) e. allocated OH (variable and fixed) f. OH variances (variable and fixed)