Enterprises manufactures tires for the Formula 1 motor racing circuit. For August

2017,

it budgeted to manufacture and sell

3,300

tires at a variable cost of

$79

per tire and total fixed costs of

$52,500.

The budgeted selling price was

$112

per tire. Actual results in August

2017

were

2,900

tires manufactured and sold at a selling price of

$113

per tire. The actual total variable costs were

$249,400,

and the actual total fixed costs were

$50,000.

Read the requirements

LOADING...

.

Requirement 1. Prepare a performance report that uses a flexible budget and a static budget.

Begin with the actual results, then complete the flexible budget columns and the static budget columns. Label each variance as favorable or unfavorable. (For variances with a $0 balance, make sure to enter "0" in the appropriate field. If the variance is zero, do not select a label.)

	Actual
	Results
Units sold
Revenues
Variable costs
Contribution margin
Fixed costs
Operating income

Flexible-Budget		Flexible
Variances		Budget

Sales-Volume		Static
Variances		Budget

Requirement 2. Comment on the results in requirement 1.

The total static-budget variance in operating income is $						There is a(n)		total flexible-budget
variance and a(n)			sales-volume variance. The sales-volume variance arises solely because actual units
manufactured and sold were			than the budgeted 3,300 units. The flexible-budget variance in operating income is due
primarily to the			in unit variable costs.