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Zippo manufactures plastic outdoor chairs. The controller put together the following static budget and actual income statements and the following additional information. Actual Static Budget

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Zippo manufactures plastic outdoor chairs. The controller put together the following static budget and actual income statements and the following additional information. Actual Static Budget Revenue 715,000 600,000 Direct materials 287,375 250,000 Direct manufacturing labor 250,250 150,000 Variable overhead 96,250 50,000 Fixed overhead 90,000 100,000 Operating income (8,875) 50,000 Budget Information Zippo expects to sell 50,000 chairs during the year Each chair is budgeted to use 10 pounds of plastic and take 1/2 hour to manufacture Variable and fixed overhead are allocated based on direct manufacturing labor hours Actual Performance Zippo sells 55,000 chairs during the year Each chair used 9.5 pounds of plastic and 0.7 hour to manufacture Chapter 7 Questions 1. Prepare a flexible budget 2. What are the level 1 variances? 3. Compute price and efficiency variance for both direct material and direct manufacturing labor 4. Comment on the level 3 variances you computed Chapter 8 Questions 1. Compute the level 3 variances for overhead 2. Compute the production-volume variance and reconcile it to the sales-volume variance 3. Why does a production volume variance exist

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