River Falls Company Uses a Flexible Budget for Its Indirect

Essay

River Falls Company uses a flexible budget for its indirect manufacturing costs. For 2017, the company anticipated that it would produce 27,000 units with 4,800 machine-hours and 8,000 employee days. The costs and cost drivers were to be as follows:

During the year, the company processed 26,500 units, worked 8,200 employee days, and had 4,850 machine-hours. The actual costs for 2017 were:

Required:
a.Prepare the static budget using the overhead items above and then compute the static-budget variances.
b.Prepare the flexible budget using the overhead items above and then compute the flexible-budget variances.