At the beginning of the year, the Calgary Region expanded its product line to include a business suitcase on wheels with a laptop compartment. This product line may be expanded into other regions if the profitability supports such expansion. Your analysis will assist in decision making not just for the existing Calgary region operations but also for potential expansion into other regions. Based on research conducted, regional managers established the following standards for each suitcase. Direct materials Direct labour Variable manufacturing overhead Total standard cost Standard Quantity or Hours Standard Price of Rate Standard Cost 1.20 kilograms $5.00 per kilogram $4.00 per hour .80 hours $3.00 per machine hour 0.30 machine-hours $6.00 3.2 0.9 $10.10 Management made the commitment to prepare a flexible budget and conduct variance analysis to support decision making for future production and product line decisions. The December flexible budget at 14,800 suitcases is provided below. Additional information respecting this product line: Normal volume is 14,950 suitcases per year; fixed costs are allocated using machine-hours (similar to VMOH). The fixed overhead budget variance is zero. Sales in units Sales Less: Variable expenses: Variable cost of goods sold* Variable selling expenses Total variable expenses Contribution Margin Less: Fixed expenses: Manufacturing overhead Selling and Administration Flexible Budget Total fixed expenses Net Income 14,800 $444,000 128,000 82,880 210,880 $63,940 Contains direct materials, direct labour, and variable MOH 149,480 19,700 169,180 $274,820