Microsoft Corporation provides the following budgeted and actual data for the production of 20,000 units:
•Budgeted: Direct materials $400,000, Direct labor $300,000, Variable overhead $200,000, Fixed overhead $240,000
•Actual: Direct materials $410,000, Direct labor $310,000, Variable overhead $210,000, Fixed overhead $250,000
Required:
1.Prepare a flexible budget for 20,000 units.
2.Calculate the variances for direct materials, direct labor, variable overhead, and fixed overhead.
3.Discuss the possible reasons for the variances and their impact on Microsoft's cost control.