Connolly Enterprises manufactures tires for the Formula I motor racing circuit. For August 2013, it budgeted to manufacture and sell 3,500 tires at a variable cost of $ 75 per tire and total fixed costs of $ 56,500. The budgeted selling price was $ 112 per tire. Actual results in August 2013 were 3,400 tires manufactured and sold at a selling price of $ 113 per tire. The actual total variable costs were $ 278,800 and the actual total fixed costs were $ 51,500.

Required

1. Prepare a performance report (akin to Exhibit 13- 2, page 540) that uses a flexible budget and a static budget.

2. Comment on the results in requirement1.