Preston Recliners manufactures leather recliners and uses flexible budgeting and a standard cost system. Preston allocates overhead based on yards of direct materials. The company's performance report includes the following selected data:
	Static Budget (1,000 recliners)	Actual Results (980 recliners)
Sales (1,000 recliners X $495)	$495,000
(980 recliners X $475)		$465,500
Variable manufacturing costs:
Direct materials (6,000 yds @ $8.80/yard)	52,800
(6,150 yds @ $8.60/yard)		52,890
Direct labor (10,000 hrs @ $9.20/hour)	92,000
(9,600 hrs @ $9.30/hour)		89,280
Variable overhead (6,000 yds @ $5.00/yard)	30,000
(6,510 yds @ $6.40/yard)		39,360
Fixed manufacturing costs:
Fixed overhead	60,000	62,000
Total cost of goods sold	$234,800	$243,530
Gross profit	$260,200	$221,970
Requirements:
1. Prepare a flexible budget based on the actual number of recliners sold.
2. Compute the price variance and the efficiency variance for direct materials and for direct labor. For manufacturing overhead, compute the variable overhead spending, variable overhead efficiency, fixed overhead spending, and fixed overhead volume variances.
3. Have Preston's managers done a good job or a poor job controlling materials, labor, and overhead costs? Why?
4. Describe how Preston's managers can benefit from the standard costing system.