Preston Recliners manufactures leather recliners and uses flexible budgeting and a standard cost system. Preston allocates overhead based on yards of direct materials. The company's performance report includes the following selected data:

Requirements
1. Prepare a flexible budget based on the actual number of recliners sold.
2. Compute the price variance and the efficiency variance for direct materials and for direct labor. For manufacturing overhead, compute the variable overhead spending, variable overhead efficiency, fixed overhead spending, and fixed overhead volume variances.
3. Have Preston's managers done a good job or a poor job controlling materials, labor, and overhead costs? Why?
4. Describe how Preston's managers can benefit from the standard costingsystem.

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Static Budget Actual Results (1,000 recliners) (980 recliners) Sales (1,000 recliners x $ 495) 24 495,000 (980 recliners x $ 475) 465,500 Variable manufacturing costs: (6,000 yds @ $8.80/yard) (6,150 yds @ $8.60/yard) (10,000 hrs @ $9.20/hour) Direct materials 52,800 52,890 Direct labor 92,000 (9,600 hrs @ $9.30/hour) 89,280 30,000 Variable overhead (6,000 yds @ $5.00/yard) (6,150 yds @ $6.40/yard) 39,360 Fixed manufacturing costs: Fixed overhead 60,000 62,000 Total cost of goods sold 234,800 S 243,530 260,200 S Gross profit 221,970