The budgeted prices for materials and direct labour per unit of finished product are $11 and $5, respectively. The production manager is delighted about the following data.

	Static Budget	Actual Costs	Variance
Direct materials	$77,000	$72,000	$5,000	F
Direct labour	35,000	31,000	4,000	F

Is the manager's happiness justified? Prepare a report that might provide a more detailed explanation of why the static budget was not achieved. Good output was 5,800 units.

Prepare a flexible budget report that might provide a more detailed explanation of why the static budget was not achieved. (For variances with a $0 balance, make sure to enter "0" in the appropriate field. If the variance is zero, do not select a label.)

	Actual
	Results at
	Actual Prices
Physical units
Direct materials
Direct labour
Total

Flexible-
Budget		Flexible
Variances		Budget

Sales-
Activity		Static
Variances		Budget

Is the manager's happiness justified? YES OR NO

The manager should be pleased that actual cost are lower than budgeted in the static budget /

should have expected higher costs when actual volume was higher than the static budget / should have expected lower costs when actual volume was lower than the static budget.

.