FAM8-A1 (similar to) A Question Help Orzo Transportation Company's general manager reports quarterly to the company president on the firm's operating performance. The company uses a budget based on detailed expectations for the forthcoming quarter. The general manager has just received the condensed quarterly performance report shown below. Click the icon to view the quarterly performance report.) Although the general manager was upset about not obtaining enough revenue, she was happy that her cost performance was favorable; otherwise, her net income would be even worse. The president was not satisfied with the performance report and remarked, "I can see some merit in comparing actual performance with budgeted performance because we can see whether actual revenue coincided with our best guess for budget purposes. But I can't see how this performance report helps me evaluate cost-control performance." Read the requirements Requirement 1. Prepare a columnar flexible budget for Orzo Transportation at revenue levels of $11,650,000, $12,000,000, and $12,350,000. Assume that the prices and mix of products sold are equal to the budgeted prices and mix. Begin with the flexible budget at revenues of $11,650,000, next, complete the flexible budget at revenues of $12,000,000 and, then, prepare the flexible budget at revenues of $12,350,000. (Enter all costs as positive numbers.) Orzo Transportation Company Flexible Budgets for Various Levels of Sales Net revenue 11,650.000 Variable Costs Fuel Repairs and maintenance Supplies and miscellaneous Variable payroll Total variable costs Fixed Costs Supervision Rent Depreciation Other fixed costs Total fixed costs Total fixed and variable costs Operating income i - Data Table 159,000F $ Budget Actual Variance $ Net revenue 12,000,000 $ 11,500,000 $ 500,000 Variable Costs Fuel $ 720,000 $ 710,000 $ 10,000 F Repairs and maintenance 480,000 481,000 1,000 U Supplies and miscellaneous 2,040,000 2,030,000 10,000 F Variable payroll 6,360,000 6,220,000 140,000 F Total variable costs $ 9,600,000 $ 9,441,000 $ Fixed Costs Supervision 180,000 $ 193,000 $ 13,000 U Rent 155,000 155,000 Depreciation 490,000 490,000 Other fixed costs 140,000 134,000 Total fixed costs 965,000 972,000 Total fixed and variable costs $ 10,565,000 $ 10,413,000 $ $ Operating income 1,435,000 $ 1,087,000 $ 348,000 U = Unfavorable. F = Favorable *For purposes of this analysis, assume that all these costs are totally variable with respect to sales revenue. In practice, many are mixed and have to be subdivided into variable and fixed components before a meaningful analysis can be made. Also, assume that the prices and mix of services sold remain unchanged. 6,000 F 7,000 u 152,000 F Print Done i - X Requirements 1. Prepare a columnar flexible budget for Orzo Transportation at revenue levels of $11,650,000, 512,000,000, and $12,350,000. Assume that the prices and mix of products sold are equal to the budgeted prices and mix. 2. Write out the flexible budget formula for costs as a function of revenue. 3. Prepare a condensed table showing the static budget variance, the sales-activity variance, and the flexible-budget variance. Print Done