1. How does the flexible budget differ from the static budget?

2. In what situation would the flexible budget and the static budget result in all of the same figures?

3. What issues could arise if a company uses only a static budget for their operations and has significant fluctuations in the overall activity/production levels?

4. Select one of the three main variances (Direct Materials, Direct Labor, or Variable Overhead) and develop an example of a product cost analysis where both the actual cost per unit (e.g. cost per pound of material or cost per hour of labor) and actual number of units (e.g. pounds or hours) differ from the budgeted amounts. Calculate both the price and quantity variances from your example.