b. Calculate the direct materials price and quantity variances.

c. Show that the direct materials, direct labor, and variable overhead variances equals the flexible budget variance for variable cost of goods sold in part (a).

d. Prepare a memo to Hank Martinez explaining why the actual variable cost of goods sold differed from the budgeted amount.

Pressure Reducers, Inc., produces and sells lumbar support cushions for office chairs using a special foam that molds to a person's back. Since all products are made to order, the only inventory the company maintains is raw materials. Thus, all costs of production are recognized in the period in which they are incurred. The following annual performance report was prepared from the company's accounting records: Actual Budget Variance Units sold Sales revenue Cost of goods sold Gross margin Selling and administrative expenses Operating income 14500 $2,972,500 2,051000 921,500 15,000 $3,000,000 $27,500 U) 925,000 (3,500 U) The following fixed costs are included in these amounts Actual Budget Cost of goods sold Selling and administrative expenses $195,000 140,000 $200,000 140,000 Hank Martinez, Pressure Reducers' CFO, used the following standard cost card in preparing the budget and thought he had done a good job estimating production and sales. He wonders why the variable cost of goods sold deviated from that budget. Standard Quantity per Unit 10 yards 5 hours 5 hours Total Cost per Unit Direct material Direct labor Variable overhead Standard Price $5 per yard $8 per DLH $7 per DLH $50 40 35 $125