Now compute the variable overhead cost and efficiency variances. Select the required formulas, compute the variable overhead cost and efficiency variances, and identify whether each variance is favorable (F) or unfavorable (U). (Round your answers to the nearest whole dollar. Abbreviations used: AC actual cost; AQ-actual quantity, FOH- fixed overhead; SC standard cost; SQ standard quantity: VOH variable overhead.)VarianceVOH cost varianceVOH efficiency varianceFormulaNow compute the fixed overhead cost and volume variances. Select the required formulas, computequantity; FOH- fixed overhead; SC standard cost; SQ standard quantity.)FormulaVariancefixed overhead cost and volume variances, and identify whether each variance is favorable (F) or unfavorable (U). (Round your answers to the nearest whole dollar. Abbreviations used: AC actual cost, AQ = actualFOH cost varianceFOH volume varianceRequirement 3. Have Smith's managers done a good job or a poor job controlling materials, labor, and overhead costs? Why?The variances computed in Requirement 2 suggest that the managers have done aManagers have done ajob controlling overhead costs as evidenced by the fact thatRequirement 4. Describe how Smith's managers can benefit from the standard costing system.Standard costing helps managers do the following:job controlling materials and labor costs. Theof the overhead variances areYdirect materials cost variance and direct labor efficiency variance help offset thedirect labor cost variance and direct materials efficiency variance. Smith Recliners manufactures leather recliners and uses flexible budgeting and a standard cost system. Smith allocates overhead based on yards of dired(Click the icon to view the selected data.)Read the requirements.Requirement 1. Prepare a flexible budget based on the actual number of recliners sold. (Round budget amounts per unit to the nearest cent.)Smith ReclinersFlexible BudgetActual Units (Recliners)Sales RevenueVariable Manufacturing Costs:Direct MaterialsDirect LaborVariable OverheadFixed Manufacturing Costs:Fixed OverheadTotal Cost of Goods SoldGross ProfitBudgetAmountsper UnitDirect materials cost variance WDirect labor cost variance=Direct materials efficiency varianceDirect labor efficiency variance.Formula=VarianceFormulaData tableSalesVarianceVariable Manufacturing Costs:Direct Materials(6,150 yds @ $8.60/yd.)(6,300 yds @ $8.40/yd.)(10,250 DLHr@ $11.20/DLHr)(9,850 DLHr@ $11.30/DLHr)Variable Overhead (6,150 yds. @ $5.10/yd.)(6,300 yds. @ $6.50/yd.)Direct Labor(1,025 recliners x $500 each)(1,005 recliners x $480 each)Fixed Manufacturing Costs:Fixed OverheadTotal Cost of Goods SoldGross ProfitPrintStatic Budget(1,025 recliners)$512,500$Done52,890114,80031,365Requirement 2. Compute the cost variance and the efficiency variance for direct materials and for direct labor. For manufacturing overhead, compute the variable overhead cost, variable overhead efficiency, fixed overhead cost, and fixed overhead volume variances. Round to the nearest dollar.Begin with the cost variances. Select the required formulas, compute the cost variances for direct materials and direct labor, and identify whether each variance is favorable (F) or unfavorable (U). (Round your answers to the nearest whole dollar. Abbreviations used: AC actual cost; AQ actual quantity: FOH = fixedoverhead; SC standard cost; SQ standard quantity.)Actual Results(1,005 recliners)$62,730261,785250,715 S482,40052,920Next compute the efficiency variances. Select the required formulas, compute the efficiency variances for direct materials and direct labor, and identify whether each variance is favorable (F) or unfavorable (U). (Round your answers to the nearest whole dollar. Abbreviations used: AC actual cost; AQ actual quantity: FOH= fixed overhead; SC standard cost; SQ standard quantity)111,30540,95064,730269,905212,495the required formulas compute the variable overhead cost and efficiency variances, and identify whether each variance is favorable (F) or unfavorable (U). (Round your answers to the nearest whole dollar. Abbreviations used: AC = actual cost; AQ-

The study of variances between actual behavior and predicted or planned behavior in budgeting or management accounting is known as variance analysis. The gap between actual and planned behavior demonstrates how business performance is being impacted, and this is essentially what is being discussed.1. Preparation of the flexible budget: Formula: Interpretation: 2. Calculation of the cost variance and efficiency variance for direct materials and direct labor, variable overhead cost variance and efficiency variance and fixed overhead cost variance and volume variance: Formula: Interpretation: 3. The variances computed in Requirement 2 suggest that the managers have done a poor job controlling materials and labor costs. The favorable direct materials cost variance and direct labor efficiency variance help offset the unfavorable direct labor cost variance and direct materials efficiency variance. Managers have done a poor job controlling overhead costs as evidenced by the fact that all of the overhead variances are unfavorable. 4. Benefits of the standard costing system for the managers are as follows: Managers that are attempting to prepare a more precise budget may find standard cost accounting to be a very useful tool. After all, accurate budgets might result in a more successful and effective firm. This is due to the fact that a typical costing system gives managers a predicted concept of spending costs. Managers can concentrate on crucial issues with the aid of standard costing strategy. Employees will be more likely to work efficiently and economically when the standards are seen as realistic. They offer benchmarks so that people can assess their own performance.