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:

Data table Sales Variable Manufacturing Direct Materials Direct Labor Variable Overhead (6,000 yds. @ $5.00/yd.) (1,000 recliners x $510 each) (980 recliners x $480 each) Costs: (6,000 yds. @ $8.60 / yd.) (6,143 yds. @ $8.40 / yd.) (10,000 DLHr @ $10.50/ DLHr) (9,600 DLHr @ $10.70 / DLHr) Static Budget (1,000 recliners) $ 510,000 51,600 105,000 30.000 Actual Results (980 recliners) EE 470,400 51,601 102,720 (6,143 yds. @ $8.40/yd.) Direct Labor (10,000 DLHr@ $10.50/DLHr) (9,600 DLHr@ $10.70 / DLHr) Variable Overhead (6,000 yds. @ $5.00/yd.) (6,143 yds. @ $6.40/yd.) Fixed Manufacturing Costs: Fixed Overhead Total Cost of Goods Sold Gross Profit Print $ Done 105,000 30,000 60,000 246,600 263,400 $ 51,601 102,720 39,315 62,000 255,636 214,764 Requirement 1. Prepare a flexible budget based on the actual number of recliners sold. Preston Recliners Flexible Budget Actual Units (Recliners) Sales Revenue Vanable Manufacturing Costs: Direct Materials Budget Amounts per Unit Direct Materials Direct Labor Variable Overhead Fixed Manufacturing Costs: Fixed Overhead Total Cost of Goods Sold Gross Profit Pequirement an ILL Begin with the cost variances. Select the required formulas, compute the cost variances for direct materials and direct labor, and identify whet the nearest whole dollar. Abbreviations used: AC actual cost; AQ = actual quantity: FOH = fixed overhead; SC standard cost; SQ standa Formula Variance Direct materials cost variance M W Direct labor cost variance Next compute the efficiency variances. Select the required formulas, compute the efficiency variances for direct materials and direct labor, and answers to the nearest whole dollar. Abbreviations used: AC actual cost; AQ actual quantity, FOH = fixed overhead: SC standard cost; SC Formula Variance Direct materials efficiency variance M Direct labor efficiency variance # Requirement 3. Have Prestor's managers done a good job or a poor job controlling materials, labor, and overhead costs? Why? The variances computed in Requirement 2 suggest that the managers have done a variance help offset the overhead variances are Requirement 4. Describe how Preston's managers can benefit from the standard coating system Standard costing helps managers do the following job controlling materials and labor costs. The direct labor cost variance and direct materials efficiency variance Managers have done a direct materials cost variance and direct labor efficiency job controlling overhead costs as evidenced by the fact that of the