III. The management accountant prepares the following performance report for a company's first year of operations:

Budget Actual Variance

Sales $300,000 $280,000

Cost of Goods Sold 180,000 150,000

Selling Expenses 20,000 25,000

Salaries Expense 50,000 60,000

Administrative Expenses 30,000 32,000

Operating Income $20,000 $13,000

Required: (10 pts.)

1. Compute variances for each line item on the income statement. Also indicate if the variances are Favorable (F) or Unfavorable (U).
2. Assuming the use of the Management-by-Exception (MBE) approach, indicate which variances should be investigated further.