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

							Static Budget	Actual Results
							(1,000 recliners)	(980 recliners)
Sales		(1,000 recliners x			$500	each)	$500,000
		(980 recliners x			$475	each)		$465,500
Variable Manufacturing Costs:
Direct Materials		(6,000 yds. @			$8.50	/ yd.)	51,000
		(6,143 yds. @			$8.30	/ yd.)		50,987
Direct Labor		(10,000 DLHr @			$9.30	/ DLHr)	93,000
		(9,600 DLHr @			$9.40	/ DLHr)		90,240
Variable Overhead		(6,000 yds. @			$5.20	/ yd.)	31,200
		(6,143 yds. @			$6.60	/ yd.)		40,544
Fixed Manufacturing Costs:
Fixed Overhead							60,600	62,600
Total Cost of Goods Sold							235,800	244,371
Gross Profit							$264,200	$221,129

1.	Prepare a flexible budget based on the actual number of recliners sold.
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.
3.	Have McKnight?'s managers done a good job or a poor job controlling?materials, labor, and overhead? costs? Why?
4.	Describe how McKnight?'s managers can benefit from the standard costing system.

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