Welding, Inc.s master budget calls for the production and sale of 5,000 units next year at a sales price of $50 per unit ($250,000).At that level of production, direct labor is budgeted at 10,000 hours. The standards call for 3 feet of material in each unit at a standard cost of $4 per foot. The standard labor rate is $6 per hour. Overhead is applied based on direct labor hours. The budgeted overhead cost formula is $20,000 plus $0.50 per labor hour.

1. Prepare a master budget detailing expected DM, DL, VOH and FOH in total and per unit for next year.

Use the following information for #2-4.

Actual results were as follows:

Units produced and sold 6,000

Materials purchased (24,000 feet) $108,000

Materials used in production 18,500 ft.

Direct labor cost (11,500 hours) $74,750

Variable overhead costs $6,380

Fixed overhead costs $21,000

2. Prepare a new budget (flexible budget) based on the years actual production level.

3. Calculate the DM price and quantity variance. All variances are recognized as soon as possible.

4. Calculate the DL rate and efficiency variance.