let me know if the pictures are not clear, I will retake, Thanks.

QUESTION -FLEXIBLE BUDGETING 1 Mackey Ltd is a manufacturer of small industrial tools with an annual sales volume of approximately 3.5 million. Sales growth has been steady during the year, and there is no evidence of cyclical demand. Production has increased gradually during the year and has been distributed evenly throughout each month. The company employs a sequential processing system with all production activities located in the same building. manufacturing overhead is applied to all products using a single rate. Fixed Mackey has always been able to compete with other manufacturers of small industrial tools. However, its market has expanded only in response to product innovations. Thus, research and development is very important and has helped Mackey to expand as well as maintain demand. Tim O'Leary, Controller, has designed and implemented a new budget system in response to concerns voiced by George Mackey, President. An annual budget that has been divided into 12 equal segments has been prepared to assist in the timely evaluation of monthly performance. Mackey was visibly upset upon receiving the May performance report for the Machining Department (reproduced below). Mackey exclaimed, "how can they be efficient enough to produce nine extra units every working day and still miss the budget by 300 a day?" Gene McKenna, Machining Department supervisor, could not understand "all the red ink" when he knew the department had operated more efficiently in May than it had in the preceding months. McKenna stated, "I was expecting a pat on the back and instead the boss tore me apart. What's more, I don't even know why?" MACHINING DEPARTMENT PERFORMANCE REPORT FOR THE MONTH ENDED MAY 31 20X8 (Over) Under Budget (180) Actual Budget 3,000 3,180 Volume in units Variable manufacturing costs: Direct materials (843) (1,552) (1,735) (4,130) 24,000 27,750 33,300 85,050 24,843 29,302 35,035 89,180 Direct labour Factory Overhead Total Fixed manufacturing overhead: Indirect labour Depreciation Tax 3,300 1,500 300 240 930 6,270 3,334 1,500 300 240 (34) Insurance 1,027 6,401 (97) (131) Other Total Corporate overhead: 328,