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Cafe and Deli operates a chain of 10 hospitals in the Los Angeles area. Its central food-catering facility. Mealman, prepares and delivers meals to the hospitals. It has the capacity to deliver up to 1,450,000 meals a year. In 2020, based on estimates from each hospital controller, Mealman budgeted for 1,040,000 meals a year. Budgeted fixed costs in 2020 were $1,508,000. Each hospital was charged $6.35 per meal-$4.90 variable costs plus $1.45 allocated budgeted fixed cost. Click the icon for additional information.) (Click the icon for additional data.) In 2021, only 725,000 Mealman meals were produced and sold to the hospitals, Keefe suspects that hospital controllers had systematically inflated their 2021 meal estimates. Read the requirements. Requirement 1. Recall that Mealman uses the master-budget capacity utilization to allocate fixed costs and to price meals. What was the effect of production-volume variance on Mealman's operating income in 2021? Determine the formula, then compute the effect of production-volume variance on Mealman operating income in 2021. (Abbreviation used: Bud - Budgeted) Fixed cost allocated using master-budget capacity Production volume variance More info Recently, the hospitals have been complaining about the quality of Mealman's meals and their rising costs. In mid-2020, Cafe and Deli's president announces that all Cafe and Deli hospitals and support facilities will be run as profit centers. Hospitals will be free to purchase quality-certified services from outside the system. Calvin Keefe, Mealman's controller, is preparing the 2021 budget. He hears that three hospitals have decided to use outside suppliers for their meals, which will reduce the 2021 estimated demand to 754,000 meals. No change in variable cost per meal or total fixed costs is expected in 2021. Reference 2020 Master Practical Capacity Budget 1.45 2021 Master Budget $ 2.00 Budgeted fixed costs per meal $ $ 1.04 Requirements 1. Recall that Mealman uses the master-budget capacity utilization to allocate fixed costs and to price meals. What was the effect of production-volume variance on Mealman's operating income in 2021? 2. Why might hospital controllers deliberately overestimate their future meal counts? 3. What other evidence should Cafe and Deli's president seek to investigate Keefe's concerns? 4. Suggest two specific steps that Keefe might take to reduce hospital controllers' incentives to inflate their estimated meal counts