Melton Enterprises manufactures tires for the Formula 1 motor racing circuit. For August 2017, it budgeted to manufacture and sell 3,300 tires at a variable cost of $75 per tire and total fixed costs of $54,500. The budgeted selling price was $111 per tire. Actual results in August 2017 were 3,200 tires manufactured and sold at a selling price of $113 per tire. The actual total variable costs were $265,600. And the actual total fixed costs were $51,000.

Requirement 1. Prepare a performance report that uses a flexible budget and a static budget.

Begin with the actual results, then complete the flexible budget columns and the static budget columns. Label each variance as favorable or unfavorable. (For variances with a $0 balance, make sure to enter "0" in the appropriate field. If the variance is zero, do not select a label.)

Requirement 2. Comment on the results in requirement 1. (choices are the words in bold, pick one for each as you go along the statements).

The total static-budget variance in operating income is $ (input amount), (F, U). There is a(n) (favorable, unfavorable)

total flexible-budget variance and a(n) (favorable, unfavorable) sales-volume variance. The sales-volume variance arises solely because actual units manufactured and sold were (less, more) than the budgeted 3,300 units. The flexible-budget variance in operating income is due primarily to the (decrease, increase) in unit variable costs.

Actual Results Flexible-Budget Variances Flexible Budget Sales-Volume Variances Static Budget Units sold Revenues Variable costs Contribution margin Fixed costs JODI Operating income