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In this problem, you must create the flexible budget and flexible budget variances for two cost items.
1. The examples that will help you are in the Master Budget lecture and Study Problem 8-27.
2. Before you compute the variance, you must identify the parameters of the cost functions (i.e., the fixed cost and the variable cost per unit).
3. Be careful to use the correct activity measure.
4. Read the directions about the sign that you should enter.
Four Flags is a retail department store. On January 1, 2014, Four Flags' accountants used the following data to develop the master budget for Four Flags for 2014:

Expected unit sales in 2014 were 1,300,000, and 2014 total revenue was expected to be $13,000,000. Actual 2014 unit sales turned out to be 1,000,000, and total revenue was $10,000,000. Actual total costs in 2014 were:

Compute the flexible-budget variances for the following two cost items (NOTE: enter favorable variances as positive numbers and unfavorable variances as negative numbers):
1. Buying Expense ?
2. Cost of Goods Sold?