Assume that owners decided to go ahead with the Canmore expansion (first introduced in question 4). The junior accountant has prepared the following report to compare the static budget (from question 4) to the actual results. The owners have asked you to complete a variance analysis. Required: Part A (4 marks)- Create a Static Budget Report Variance Analysis, indicating whether variances are favorable (F) or unfavorable (U). All variance amounts should be shown as positive numbers. Static Budget Actual Variance Favorable or Amount Results Amount Unfavorable Sales in Units 4,096 5,330 Sales 512,000 $ 639,600 Less: Variable Costs: Cost of Goods Sold 217,000 220,000 Sales Commissions 66,560 70,356 Total Variable Costs 283,560 290,356 Contribution Margin 228,440 349,244 Less: Fixed Costs: Total Fixed Costs 197,000 177,000 Net Operating Income 31,440 172,244 What is the weakness of using a static budget report to evaluate performance? (2 marks) Required: Part B (6 marks) - The owners can see that the company sold a different amount of units than budgeted. They have asked you to create a flexible budget report. Flexible Budget Actual Variance Favorable (F) or Amount Results Amount Unfavorable (U) Sales in Units 5,330 Sales 639,600 Less: Variable Costs: Cost of Goods Sold 220,000 Sales Commissions 70,356 Total Variable Costs 290,356 Contribution Margin 349,244 Less: Fixed Costs 177,000 Net Operating Income 172,244 Management was pleased on the results based on the static budget report. Should they be pleased? What does the flexible budget tell you? What are your recommendations to management based on the flexible budget report? (3 marks)