7-21 Flexible budget. Sweeney Enterprises manufactures tires for the Formula I motor racing circuit. For August 2017, it budgeted to manufacture and sell 3,600 tires at a variable cost of $71 per tire and total fixed costs of $55,000. The budgeted selling price was $114 per tire. Actual results in August 2017 were 3,500 tires manufactured and sold at a selling price of $116 per tire. The actual total variable costs were $280,000, and the actual total fixed costs were $51,000.

1. Prepare a performance report (akin to Exhibit 7-2, page 254) that uses a flexible budget and a static budget

2.) Comment on the results in requirement 1

7-25 Flexible-budget and sales volume variances. Cascade, Inc., produces the basic fillings used in many popular frozen desserts and treatsvanilla and chocolate ice creams, puddings, meringues, and fudge. Cascade uses standard costing and carries over no inventory from one month to the next. The ice- cream product groups results for June 2017 were as follows:

Performance Report: Actual Results Static Results

Units (pounds) 460,000 447,000

Revenues 2,626,000 2,592,600

Variable manufacturing costs 1,651,400 1,564,500

Contribution Margin 975,200 1,028,100

Jeff Geller, the business manager for ice-cream products, is pleased that more pounds of ice cream were sold than budgeted and that revenues were up. Unfortunately, variable manufacturing costs went up, too. The bottom line is that contribution margin declined by $52,900, which is just over 2% of the budgeted rev- enues of $2,592,600. Overall, Geller feels that the business is running fine.

1. Calculate the static-budget variance in units, revenues, variable manufacturing costs, and contribu- tion margin. What percentage is each static-budget variance relative to its static-budget amount?

2. Break down each static-budget variance into a flexible-budget variance and a sales-volume variance. 3. Calculate the selling-price variance. 4. Assume the role of management accountant at Cascade. How would you present the results to Jeff

Geller? Should he be more concerned? If so, wh