7-21 Flexible budget. Brabham Enterprises manufactures tires for the Formula I motor racing circuit. For August 2017, it budgeted to manufacture and sell 3,000 tires at a variable cost of $74 per tire and total fixed costs of $54,000. The budgeted selling price was $110 per tire. Actual results in August 2017 were 2,800 tires manufactured and sold at a selling price of $112 per tire. The actual total variable costs were $229,600, and the actual total fixed costs were $50,000. Required: 1. Prepare a performance report (akin to Exhibit 7-2, page274) that uses a flexible budget and a static budget. 2. Comment on the results in requirement 1. SOLUTION 1. Flexible budget. Variance Analysis for Brabham Enterprises for August 2017 Flexible- Sales- Budget Volume Actual Results Variances Flexible Variances Static (2)=(1)- Budget (4)=(3) - Budget (1) (3) (3) (5) (5) 200 Units (tires) sold 2,800% 0 2,800 U 3,000% Revenues $313,600 $ 5,600 F $308,000 $22,000 U $330,000 14,800 Variable costs 229.600d 22,400 U 207.200 F 222,000 Contribution 7,200 margin 84,000 16,800 U 100,800 U 108,000 Fixed costs 50,000 4,000 F Operating income $ 34,000 54,000% $ $12,800 U 46,800 0 54,000% $ 7,200 U 54,000 $12,800 U $ 7,200 U Total flexible-budget variance $20,000 U Total static-budget variance *112 x 2,800 $313,600 b $110 x 2,800 $308,000 $110 3,000 $330,000 Giyen. Unit variable cost $229,600 2,800 = $82 per tire e $74x2,800 $207,200 $74 3,000 $222,000 Given 1