PR $11-39($Algo$)$ Budgets and Performance Evaluation $($LO $11-1,11-6)$

Johnson Electrical produces Industrlal ventilation fans. The company plans to manufacture $84,000$ fans evenly over the next quarter at

he following costs: direct materlal, $$1,932,000$; direct labor, $$588,000$; varlable production overhead, $$659,400$; and fixed production

pverhead, $$951,000.$ The $$951,000$ amount Includes $$96,000$ of straight$-$IIne depreclation and $$108,000$ of supervisory salarles.

Shortly after the conclusion of the quarter's first month, Johnson reported the following costs:

Pave Kellerman and his crews turned out $25,000$ fans durlng the month$-$a remarkable feat given that the firm's manufacturing plant

was closed for several days because of storm damage and flooding. Kellerman was especlally pleased with the fact that overall

inanclal performance for the perlod was favorable when compared with the budget. HIs pleasure, however, was very short$-$lived, as

Johnson's general manager Issued a stern warnIng that performance must Improve, and Improve quickly, If Kellerman had any hopes

of keeping his job.

Required:

Explain the difference between a statlc budget and a flexible budget.

Which of the two budgets would be more useful when planning the company's cash needs over a range of actlvity?

Prepare a performance report that compares static budget and actual costs for the perlod just ended $($I$.$e$.,$ the report that Kellerman

Ikely used when assessing his performance$).$

Prepare a performance report that compares flexible budget and actual costs for the perlod just ended $($I$.$e$.,$ the report that the

general manager likely used when assessing Kellerman's performance$).$

$5-$a$.$ Which of the following two reports is preferred?

$5-$b$.$ Which of the following statements is false?

Complete this question by entering your answers in the tabs below.

Prepare a performance report that compares static budget and actual costs for the period just ended $($i$.$e$.,$ the report that

Kellerman likely used when assessing his performance$).$

Note: Indicate the effect of each variance by selecting "Favorable" or "Unfavorable". Select "None" and enter $"0"$ for no effect

$($i$.$e$.,$ zero variance$).$ Do not round intermediate calculations.