Superior manufactures wooden playsets. Information related to the sale and production during the year are as follows:

	Actual	Static Budget
Units sold	14,200	13,500
Revenue	21,200,000	20,000,000
Variable costs:
Direct material	11,900,000	10,800,000
Direct labor	3,400,000	3,577,500
Variable manuf. overhead	4,000,000	4,006,800
Total	19,300,000	18,384,300
Contribution margin	1,900,000	1,615,700
Fixed costs	500,000	450,000
Operating income	1,400,000	1,165,700

• Additional direct material information:
  • Direct materials are budgeted at 400 feet per playset and $2.00 per foot.
  • Actual direct materials used totaled 5,800,000 feet.
• Additional direct labor information:
  • Direct labor is budgeted at 10.6 hours per playset and a $25 hourly rate
  • Actual labor hours incurred totaled 135,000 hours
• Additional overhead information:
  • Activity driver is direct labor hours

Please Show Work

1. What is a flexible budget?
2. Determine the flexible budget for direct materials and fixed overhead costs.
3. Determine the direct material price and efficiency variances.
4. Determine the fixed overhead spending variance.
5. What is a possible explanation for the direct material price variance?