My Library MyLab Accounting with -- for Managerial Accounting, Fourth Canadian Edition, 4/e E Q AA . . Application Questions A10-79 COMPUTE FLEXIBLE BUDGET AND SALES VOLUME VARIANCES (Learning Objective 6) ReelTime distributes DVDs to movie retailers. ReelTime's top management meets monthly to evaluate the company's performance. Controller Jairo Munoz prepared the following performance report for the meeting. REELTIME, INC. Income Statement Performance Report Month Ended July 31 Actual Results Static Budget Variance Sales revenue $1,640,000 $1,960,000 $320,000 U Variable expenses: Cost of goods sold 773,750 980,000 206,250 F Sales commissions 77,375 107,800 30,425 F Shipping expense 42,850 53,900 11,050 F Back to PageMyLab Accounting with - for Managerial Accounting, Fourth Canadian Edition, Ale QAAEE, Shipping expense 11,050 F Fixed expenses: Salary expense 10,950 U Depreciation expense 5,250 F Rent expense 20,000 U Advertising expense 12,600 U Total expenses 209 425 F Operating income $110,575 U Munoz also revealed that the actual sales price of $20 per movie was equal to the budgeted sales price and that there were no changes in inventories for the month. Management is disappointed by the operating income results. CEO Philippe Collin exclaims, \"How can actual operating income be roughly 13% of the static budget amount when there are so many favourable variances?\" Re a uirements MyLab Accounting with - for Managerial Accounting, Fourth Canadian Edition, Ale QAAEE, Shipping expense 11,050 F Fixed expenses: Salary expense 10,950 U Depreciation expense 5,250 F Rent expense 20,000 U Advertising expense 12,600 U Total expenses 209 425 F Operating income $110,575 U Munoz also revealed that the actual sales price of $20 per movie was equal to the budgeted sales price and that there were no changes in inventories for the month. Management is disappointed by the operating income results. CEO Philippe Collin exclaims, \"How can actual operating income be roughly 13% of the static budget amount when there are so many favourable variances?\" Re a uirements MyLab Accounting with - for Managerial Accounting, Fourth Canadian Edition, Ale QAAEE, Total expenses 209 425 F Operating income $ 16,475 $110,575 U Munoz also revealed that the actual sales price of $20 per movie was equal to the budgeted sales price and that there were no changes in inventories for the month. Management is disappointed by the operating income results. CEO Philippe Collin exclaims, \"How can actual operating income be roughly 13% of the static budget amount when there are so many favourable variances?" Requirements 1. Prepare a more informative performance report. Be sure to include a exible budget for the actual number of DVDs bought and sold. . As a member of ReelTime's management team, which variances would you want investigated? Why? . Gollin believes that many consumers are postponing purchases of new movies until after the introduction of a new format for recordable DVD players. In light of this information, how would you rate the company's performance? A10-80 CALCULATE EFFICIENCY VARIANCES (Learning Objective 3 ) Assume that you manage your local Marble Slab Creamery ice cream parlour. In