The budgeted prices for materials and direct labor per unit of finished product are $8 and $7, respectively. The production manager is delighted about the following data:

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 5,300 units.

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Static Budget $59,200 51,800 Actual Costs $49,900 39,200 Variance Direct materials Direct labor 1 $9,300 F 12,600 F