Madigan produces a single high- speed modem. The following table summarizes the current month’s budget for Madigan’s modem production:

Projected production and sales....... 4,000 units

Variable costs............. $ 640,000

Fixed costs............... $ 480,000

Total production budget........... $ 1,120,000

Actual production and sales for the month were 3,900 units. Total production costs were $ 1,114,800, of which $ 631,800 were variable costs.

Required:

a. Prepare an end- of- month variance report for the production department using the beginning- of- month static budget.

b. Prepare an end- of- month variance report for the production department using the beginning- of- month flexible budget.

c. Write a short memo evaluating the performance of the production manager based on the variance report in (a).

d. Write a short memo evaluating the performance of the production manager based on the variance report in (b).

e. Which variance report— the one in (a) or (b)— best reflects the performance of the production manager? Why?