Exercises 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. EXHIBIT 7-2 Level 2 Flexible-Budget-Based Variance Analysis for Webb Company for April 2017 Level 2 Analysis Actual Results (1) Flexible-Budget Variances (2) = (1)-(3) Flexible Budget (3) Sales-Volume Variances (4) = (3) -(5) 2.000 U $240,000 U Static Budget (5) 12,000 $1,440,000 10,000 $1,250,000 10,000 $1,200,000 $50,000 F Units sold Revenues Variable costs Direct materials Direct manufacturing labor Variable manufacturing overhead Total variable costs Contribution margin Fixed manufacturing costs Operating income 621,600 198,000 130,500 950,100 299,900 285,000 14,900 21,600 U 38,000 U 10,500 U 70.100 U 20,100 U 9,000 U $29,100 U 600,000 160,000 120,000 880,000 320,000 276,000 44,000 120,000 F 32,000 F 24,000 F 176,000 F 64,000 U 720,000 192,000 144,000 1,056,000 384,000 276,000 $ 108,000 $ $ $ 64,000 U Level 2 $29,100 U Flexible-budget variance $ 64,000 U Sales-volume variance Level 1 $93,100 U Static-budget variance F favorable effect on operating income; U unfavorable effect on operating income