Wade Paving Company has a sealcoating activity and wants to develop a flexible budget formula for the activity. The following resources are used by the activity:
• Five truck-mounted sealing units, with a lease cost of $15,000 per year per unit
• Ten sealcoating employees each paid a salary of $40,000 per year (A total of 20,000 sealcoating hours are supplied by the 10 workers.)
• Sealcoating materials: $1,000 per job
• Sealcoating hours: Four hours used per job

During the year, the activity operated at 90 percent of capacity and incurred the following actual activity and resource costs:
• Lease cost: $75,000
• Salaries: $420,000
• Sealcoating materials: $4,400,000

Required:
1. Prepare a flexible budget formula for the sealcoating activity using sealcoating hours as the driver.
2. Prepare a performance report for the sealcoating activity.
3. What if sealcoating employees were hired through outsourcing and paid $18 per hour (the sealcoating equipment is provided by Wade)? Repeat Requirement 1 for the outsourcing case.