Solid Box Fabrications manufactures boxes for workstations. The firm's standard cost sheet prior to - ber of the current year and actual results for October are as follows: Budget Information Standard Price and Variable Costs per Unit Fixed Actual Costs Results October Units Sales: $50.00 9,500 $ 551,000 Variable costs: Direct materials 5 pounds at $2.40 per pound $12.00 48,000 lbs. x $3 per pound = $144,000 Direct labor 0.5 hour at $14 per hour 7.00 4,800 hrs. x $16 per hour = 76,800. Manufacturing overhead 2.00 Selling and administrative 5.00 19,000 55,100 $294,900 Total variable costs $26.00 $256,100 Contribution margin $24.00 Fixed costs: Manufacturing (factory) overhead Selling and administrative Total fixed costs Operating income $50,000 20,000 $70,000 $ 55,000 24,000 $ 79,000 $177,100 *Assume that pounds purchased = pounds issued to production (i.e., u JIT inventory policy). In preparing the master budget for October, the firm recognized that several items on the standard cost sheet were expected to change. For example, the selling price of the product was expected to increase by 8%. Suppliers have notified the firm that starting October 1, materials prices would be 5% higher. The labor contract prescribes a 10% increase, starting October 1, on wages and benefits. Fixed manufacturing costs were expected to increase $5,000 for insurance, property taxes, and salaries. Fixed selling and administra- tive costs were expected to increase as follows: $2,000 in managers' salaries and $2,000 for advertising during October. The unit sales for October were expected to be 10,000 units. Solid Box Fabrications uses a JIT approach in all of its operations, including materials acquisitions and product manufacturing. Required 1. Prepare the master budget and pro forma budgets for 9,500 units and 11,000 units for October. 2. Calculate and label as favorable or unfavorable the master budget variance for October. Break this vari- ance down into the sales volume variance and the total flexible budget variance for the period. 3. Compute and label as favorable or unfavorable each of the following variances for October: selling price variance, total variable cost flexible budget variance, and total fixed cost variance. 4. Break down the total direct materials flexible budget variance and the total direct labor flexible budget variance into their price (rate) and quantity (efficiency) components. Label each component variance as favorable or unfavorable.