Amethyst has a standard variable overhead rate of $5 per direct labour hour. The standard quantity of direct labour per unit of production is 2 hours. The company's static budget was based on 50,000 units. Actual results for the year are as follows.

Actual units produced 45,000

Actual direct labour hours 100,000

Actual variable overhead $495,000

The time has come for the company to compare of actual results with planned results.

Required

1. What is the companys (i) static budget and (ii) flexible budget for the variable overhead costs? (3 marks)

2. What is the companys variable overhead costs (i) spending variance and (ii) efficiency variance? (3 marks)

3. Regarding the companys actual results, flexible budget, and static budget, does having a small static-budget variance always implies a good budgeting process? Use your calculations to support your argument. (4 marks)