QUESTION 3 (10 MARKS) Flexible Budget (a) A Flexible Budget is developed using budgeted revenues or cost amounts based on the actual output level in the budget period. The actual level of output is unknown until the end of the budget period. A budget that has been adjusted in this way is known as flexed budget. Variances bring together the planning and control functions of management and facilitate management by exception. Management by exception is a practice whereby managers focus more closely on areas that are not operating as expected and less closely on areas that are. Based on the above statement, explain the relationship between Flexible Budget and Variances by providing an example. (4 marks) (b) Describe Three(3) possible reasons for an unfavorable direct manufacturing labor efficiency variance. (3 marks) (c) Explain how can variance analysis help in continuous improvement? (3 marks)