Midwest Ventilation, Inc., produces industrial ventilation fans. The company plans to manufacture 81,000 fans evenly over the next quarter at the following costs: direct material, $1,944,000; direct labor, $324,000; variable production overhead, $522,450; and fixed production overhead, $948,000. The fixed-overhead amount includes $78,000 of straight-line depreciation and $120,000 of supervisory salaries. Shortly after the conclusion of the quarters first month, Midwest reported the following costs:

Direct material $ 585,500

Direct labor 94,500

Variable production overhead 178,000

Depreciation 26,000

Supervisory salaries 40,800

Other fixed production overhead 245,000

Total $ 1,169,800

Dave Kellerman and his crews turned out 23,000 fans during the montha remarkable feat given that the firms manufacturing plant was closed for several days because of storm damage and flooding. Kellerman was especially pleased with the fact that overall financial performance for the period was favorable when compared with the budget. His pleasure, however, was very short-lived, as Midwests general manager issued a stern warning that performance must improve, and improve quickly, if Kellerman had any hopes of keeping his job.

Required: 2. Which of the two budgets would be more useful when planning the companys cash needs over a range of activity?

Flexible Budget or Static Budget????

3. Prepare a performance report that compares budgeted and actual costs for the period just ended (i.e., the report that Kellerman likely used when assessing his performance). (Indicate the effect of each variance by selecting "Favorable" or "Unfavorable". Select "None" and enter "0" for no effect (i.e., zero variance).)

-----------	Static budget:	Actual:	---------------
---------	27,000 units	23,000 units	Variance
Total