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Hamim Chairs Cardinal Chairs produces leather chairs and uses a flexible budget. Please refer to the information below for the month of October. Cardinal allocates overhead based on yards of direct materials. Budget Actual at 1,000 (980 chairs chairs) Sales (1,000 chairs @ $505 each) $505,000.00 $470,400.00 Variable manufacturing costs: Direct materials (6,000 yards @ $8.60 per yard) 51,600.00 (6,143 yards @ $8.40 per yard) 51,601.20 Direct labor (10,000 hours @ $15.20 per hour) 152,000.00 (9,600 hours @ $16.00 per hour) 153,600.00 Variable manufacturing overhead (6,000 yards @ $5.20 per yard) 31,200.00 (6,143 yards @ $6.60 per yard) 40,543.80 Fixed manufacturing overhead 60,600.00 62,600.00 Cost of goods sold 295,400.00 308,345.00 Gross profit $209,600.00 $162,055.00 Based on the information above, a flexible budget and flexible budget performance report was prepared. These are shown on the "FlexibleBudgetSolution" worksheet. The CEO reviewed the flexible budget performance report. After reviewing the report, she asked you to dig into the direct materials and direct labor numbers. More specifically, the direct materials variance was unfavorable by $1,032. Why is this? Were more materials used than we anticipated or did we pay more for direct materials than anticipated, or both? Secondly, the direct labor variance was unfavorable by $4,640. Again, why is this? Were more hours worked than we anticipated or did we pay more for labor than anticipated, or both? So, she wants to know how much of each variance is caused by these attributes.

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