At the beginning of the period, Canaan Company estimated that sales would be 5,000 units. Actual sales totaled 7,000 units. The manager was very excited about the unexpected additional income that the extra 2,000 units would produce. Imagine her surprise upon seeing the following report: Static Budget 5,000 Actual Results Number of units 7,000 $250,000 $300,000 Sales Less variable costs: Materials Labor Overhead Selling & admin Contribution margin Less feed costs 60,000 50,000 25,000 10,000 $105,000 82,000 67,000 36,000 15.000 $100,000 Manufacturing Seiling de admin Net income 15,000 30.000 $ 60,000 16,000 28.000 $56.000 The company's owner is very upset, charging that the manager did a lousy job of controlling costs. Required: 1) Prepare a performance report (comparing actual results with a flexible budget) that can be used to evaluate the owner's charge that the manager did a poor job of controlling costs. Be sure to label variances as favorable or unfavorable. 2) Is the owner justified in charging the manager with poor cost control? Why or why not? 167