Miller Company's most recent contribution format income statement is shown below: Total $370,000 259,000 Per Unit $10.00 Sales (37,000 units) Variable expenses 7.00 Contribution margin $3.00 111,000 Fixed expenses 47,000 64,000 Net operating income Required: Prepare a new contribution format income statement under each of the following conditions (consider each case independently): (Do not round intermediate calculations. Round your "Per unit" answers to 2 decimal places.) 1. The number of units sold increases by 16% Miller Company Contribution Income Statement Total Per Unit 0.00 0 0 2. The selling price decreases by $1.20 per unit, and the number of units sold increases by 19% Miller Company Contribution Income Statement Per Unit Total 0.00 0 0 3. The selling price increases by $1.20 per unit, fixed expenses increase by $8,000, and the number of units sold decreases by 2%. Miller Company Contribution Income Statement Total Per Unit Sales Variable expenses Contribution margin Fixed expenses 0.00 0 Net operating income 0 4. The selling price increases by 20%, variable expenses increase by 10 cents per unit, and the number of units sold decreases by 12% Miller Company Contribution Income Statement Total Per Unit 0S 0.00 0 Several years ago, Westmont Corporation developed a comprehensive budgeting system for planning and control purposes. While departmental supervisors have been happy with the system, the factory manager has expressed considerable dissatisfaction with the information being generated by the system. A typical departmental cost report for a recent period follows: Assembly Department Cost Report For the Month Ended March 31 Planning Budget 40,000 Actual Variances Results Machine-hours 35,000 Variable costs Supplies Scrap Indirect materials $1,800 F 30, 200 23,300 52,300 32,000 24,000 56,000 700 F 3,700 F Fixed costs: Wages and salaries Equipment depreciation 95,300 76,000 96,000 76,000 700 F 277,100 284,000 $6,900 F Total cost After receiving a copy of this cost report, the supervisor of the Assembly Department stated, "These reports are super. It makes me feel really good to see how well things are going in my department. I can't understand why those people upstairs complain so much about the reports." For the last several years, the company's marketing department has chronically failed to meet the sales goals expressed in the company's monthly budgets. Required: 1. The company's president is uneasy about the cost reports, what can be the reason? (You may select more than one answer. Single click the box with the question mark to produce a check mark for a correct answer and double click the box with the question mark to empty the box for a wrong answer.) Cost reports are ineffective since budgeted costs at one level of activity are compared to actual costs at another level of actvity. 2 Cost reports show whether fixed costs are controlled and do not show whether variable costs are controlled. Cost reports are effective since budgeted costs at one level of activity are compared to actual costs at another level of activity. Cost reports show whether fixed costs and varlable costs are controlled. 3. Complete the new performance report for the quarter, based on Flexible Budget Performance approach. (Indicate the effect of each variance by selecting "F" for favorable, "U" for unfavorable, and "None" for no effect (i.., zero variance). Input all amounts as positive values.) Westmont Corporation Assembly Department Flexible Budget Performance Report For the Month Ended March 31 Planning Budget Actual Results Flexible Activity Variances Spending Variances Budget Machine-hours (q) 35,000 40,000 Supplies 30,200 32,000 Scrap 23,300 24,000 52,300 56,000 Indirect materials Wages and salaries 95,300 96,000 Equipment depreciation 76,000 76,000 S 277,100 S 284,000 Total AirQual Test Corporation provides on-site air quality testing services. The company has provided the following data concerning its operations: Fixed Variable Actual Component per Month Component per Job $277 Total for February $27,720 8,050 Revenue Technician wages Mobile lab operating $8,200 $ 8,240 2,680 $ 1,630 $ 28 $ 3 $5,000 $2,500 expenses Office expenses Advertising expenses $1,560 $2,870 970 2,870 Insurance Miscellaneous expenses 1 385 The company uses the number of jobs as its measure of activity. For example, mobile lab operating expenses should be $5,000 plus $28 per job, and the actual mobile lab operating expenses for February were $8,240. The company expected to work 110 jobs in February, but actually worked 108 jobs. Required: Complete the flexible budget performance report showing AirQual Test Corporation's revenue and spending variances and activity variances for February. (Indicate the effect of each variance by selecting "F" for favorable, "U" for unfavorable, and "None" for no effect (i.e., zero variance). Input all amounts as positive values.) AirQual Test Corporation Flexible Budget Performance Report For the Month Ended February 28 Activity Variances Revenue and Spending Variances Revenue Expenses: Technician wages Mobile lab operating expenses Office expenses Advertising expenses Insurance Miscellaneous expenses Total expense Net operating income