Coca-Cola Company provides the following budgeted and actual data for producing 35,000 units:
•Budgeted: Direct materials $700,000, Direct labor $525,000, Variable overhead $350,000, Fixed overhead $420,000
•Actual: Direct materials $720,000, Direct labor $545,000, Variable overhead $370,000, Fixed overhead $430,000
Required:
1.Prepare a flexible budget for 35,000 units.
2.Calculate the variances for direct materials, direct labor, variable overhead, and fixed overhead.
3.Provide possible reasons for the variances.