Rain Gear, Inc., produces rain jackets. The master budget shows the following standards information and indicates the company expected to produce and sell 28,000 units for the year. Variable manufacturing overhead is allocated based on direct labor hours.

Direct materials	4 yards per unit at $3 per yard
Direct labor	2 hours per unit at $10 per hour
Variable mfg OH	2 direct labor hours per unit at $4 per hour

Rain Gear actually produced and sold 30,000 units for the year. During the year, the company purchased and used 130,000 yards of material for $429,000. A total of 65,000 labor hours were worked during the year at a cost of $637,000. Variable overhead costs totaled $231,000 for the year.

1. Provide a flexible budget of production costs for the year

2. Calculate the materials price variance and materials quantity variance. Enter your calculations into the table below to present your findings:

	Actual	Flexible budget	Budget Variance	Price Variance	Quantity Variance

3. Calculate the labor rate variance and labor efficiency variance. Enter your calculations into the table below to present your findings:

	Actual	Flexible budget	Budget Variance	Rate Variance	Efficiency Variance
DL

4. Calculate the variable overhead spending variance and variable overhead efficiency variance. Enter your calculations into the table below to present your findings:

	Actual	Flexible budget	Budget Variance	Spend Variance	Efficiency Variance
VOH

5. Company policy is to investigate all variances greater than 10 percent of the flexible budget amount for each of the three variable production costs: direct materials, direct labor, and variable overhead. Identify which of the six variances calculated in requirements b through e should be investigated.

6. Provide two possible explanations for each variance identified in requirement e.