Super Fancy Toys Company $($SFTC$)$ is a leading kids toys manufacturing company. The company

utilizes a flexible budget and standard costs to aid in the planning and control of its products. The

costing system for manufacturing includes two direct$-$cost categories: direct materials and direct

manufacturing labour, both of which are variable costs. Additionally, there are two overhead$-$cost

categories: variable manufacturing overhead and fixed manufacturing overhead. The allocation of both

overhead costs is based on direct manufacturing labour$-$hours.

At the $100,000$ budgeted direct manufacturing labour$-$hour level for August $2023,$ budgeted direct

manufacturing labour is $$2,500,000,$ budgeted variable manufacturing overhead is $$1,000,000,$ and

budgeted fixed manufacturing overhead is $$2,000,000.$

The actual results for August $2023$ are as follows:

$$ Direct materials

Price variance $($based on purchases$)$ $$358,600F$

Efficiency variance $$151,800U$

$$ Direct manufacturing labour costs incurred $$1,071,000$

$$ Variable manufacturing overhead

Flexible$-$budget variance $$20,800U$

Efficiency variance $$36,200U$

$$ Fixed manufacturing overhead incurred $$1,915,100$

The standard cost per pound of direct materials is $$11\mathrm{.}50.$ The standard allowance is $6$ pounds of direct

materials for each unit of product. In August $2023,$ a total of $40,000$ units of product were actually

manufactured. There were no direct materials in the beginning inventory, and no work in process at the

beginning or end of the month. During August $2023,$ the direct materials price variance was $$1\mathrm{.}10$ per

pound.

In July $2023,$ due to labour unrest, production was significantly slowed down, resulting in an

unfavourable variance of $$80,000$ for direct manufacturing labour efficiency. There was no variance in

the direct manufacturing labour price in July $2023.$ The labour unrest continued into August $2023,$

leading to some workers quitting. Their replacements had to be hired at higher wage rates, which were

then extended to all workers. In August $2023,$ the actual average wage rate exceeded the standard

average wage rate by $$0\mathrm{.}50$ per hour.

Required

$$ Explain the concept of a flexible budget and its benefits for the kids toys manufacturing company.

How does the company use the flexible budget in planning and controlling its products?

$$

$$ Calculate the following for August $2023$:

$($a$)$ Total pounds of direct materials actually purchased

$($b$)$ Total number of pounds of excess direct materials used

$($c$)$ Variable manufacturing overhead spending variance

$($d$)$ Total number of actual direct manufacturing labour$-$hours used

$($e$)$ Total number of standard direct manufacturing labour$-$hours allowed for the units produced

$($f$)$ Fixed manufacturing overhead production$-$volume variance

$$ Describe how FSTC$\text{'}$s control of variable manufacturing overhead items differs from its control of

fixed manufacturing overhead items.