Experience has shown that 20% of the billings are paid by the wholesalers in the month of the purchase, while the rest is being paid in the month after the purchase. Kollegg's buys the direct material corn from one supplier. Actual purchases of corn in January were 1,155,000 Euro and in February 1,034,000 Euro. Kellogg's pays 40% of the corn purchases in the month of the purchase and 50% in the month after the purchase. The remaining 10% are overdue and paid in the second month after the purchase which causes an additional handling fee of 5% of this overdue amount. All other costs are paid as incurred. Kollegg's does not keep any stock of finished packages and the produced quantity equals the sold quantity of cornflakes. However, it keeps stock of the raw material corn and requires a target closing stock of corn at the end of each month of 20% of the expected amount of corn to be used in production in the next month. The ending balances of February show the following information: Cash Stock of corn (valued at 0.50 Euro per kg) 300,000 Euro 286,000 Euro After some time, one of your new tasks includes to analyse the performance of Kollegg's in the month of June. Based on all standard amounts from the information above, you have previously set up the following budgeted income statement for June, where Kollegg's expected to produce and sell 2,800,000 packages of cornflakes. You now compare the budget with the actual results of June, where actually 3,000,000 packages were sold: Budget Euro 5,600,000 Euro 1,540,000 Euro 1,050,000 Euro Actual results Euro Quantities 5,850,000 Euro 3,000,000 packages 1,687,500 Euro 3,750,000 kg corn 1,200,000 Euro 6,000 machine hours Revenue Direct materials Variable manufacturing overhead costs Fixed costs Operating profit 850,000 Euro 2,160,000 Euro 800,000 Euro 2,162,500 Euro Question 3. Prepare the flexible budget income statement for the month of June (using the same structure as the income statement above) and calculate the flexible-budget variances and sales-volume variances for each line. Please also explain how you calculate these variances. Question 4. Determine the price variance and the efficiency variance for direct materials. Give two possible reasons for each of the two variances. Question 5. Discuss the performance of Kollegg's in the month of June based on your results from Questions 3 and 4