Monthly Budget Data:

Selling price per unit: $5.00 per box

Raw Material Costs $1.50 per box

Packaging Costs $0.80 per box

Salary and Wages Costs $300,000 per month

OT for production over 3,000,000 units $0.70 per box

Fringe Benefits 50% of Wages and OT Electricity $0.10 per box

Rent Costs $500,000 per month Insurance Costs $60,000 per month

Depreciation Costs $240,000 per month

Question 2: The month of January 2019 is complete, and HammerTime wants to compare their budget to their actual results. Actual results are shown in the table above.

a) Compare Januarys actual results to the static budget you created in Question 1.

b) Analyze the static budget variances. Be sure to break out price and volume variances and whether they are favorable or unfavorable for each line item. Provide possible explanations.

c) Create the flexible budget based on actual units produced for January.

d) Compare actual results to budgeted results for the flexible budget.

e) Analyze the flexible budget variances. Be sure to include the variance amount and whether the variance is favorable or unfavorable for each line item. Provide possible explanations.

f) HammerTime wants to determine whether they should use a flexible budget or a static budget going forward. Write a memo to their CFO explaining some pros and cons of each option. Provide a recommendation including the reason(s) you recommend that approach.