Coca-Cola Company provides the following budgeted and actual data for producing 40,000 units:
•Budgeted: Direct materials $800,000, Direct labor $600,000, Variable overhead $400,000, Fixed overhead $480,000
•Actual: Direct materials $820,000, Direct labor $620,000, Variable overhead $420,000, Fixed overhead $490,000
Required:
1.Prepare a flexible budget for 40,000 units.
2.Calculate the variances for direct materials, direct labor, variable overhead, and fixed overhead.
3.Provide possible reasons for the variances.