Question 1: Prepare a static budget in Excel for Vroom-Vroom based on 200,000 units produced. (32 points)

1. Show the static budget for January in Contribution Margin Income Statement format be sure to list out each expense line.

2. Compare Januarys static budget to Januarys actual results. Specify which line items are favorable or unfavorable and how much. Provide potential explanations for each of the variable costs. Note: Saying that an item was above or below budget is NOT an explanation. You need to include potential (made-up) reasons.

3. Show the static budget for February in Contribution Margin Income Statement format be sure to list out each expense line.

4. Compare Februarys static budget to Februarys actual results. Specify which line items are favorable or unfavorable and how much. Provide potential explanations for each of the variable costs. Note: Saying that an item was above or below budget is NOT an explanation. You need to include potential (made-up) reasons.

Question 2: Prepare a flexible budget in Excel for Vroom-Vroom. (32 points)

1. Show the flexible budget for January in Contribution Margin Income Statement format be sure to list out each expense line.

2. Compare Januarys flexible budget to Januarys actual results. Specify which line items are favorable or unfavorable and how much. Provide potential explanations for each of the variable costs. Note: Saying that an item was above or below budget is NOT an explanation. You need to include potential (made-up) reasons.

3. Show the flexible budget for February in Contribution Margin Income Statement format be sure to list out each expense line.

4. Compare Februarys flexible budget to Februarys actual results. Specify which line items are favorable or unfavorable and how much. Provide potential explanations for each of the variable costs. Note: Saying that an item was above or below budget is NOT an explanation. You need to include potential (made-up) reasons.

Question 3: Analyze the differences between static and flexible budgets. (34 points)

1. What is the difference between static and flexible budgets in theory?

2. What are the differences between the static and flexible budgets for Vroom-Vroom? What variances are different and by how much? What does this tell us?

3. What are the pros and cons for each - static and flexible budgets?

4. Write a letter to Vroom-Vrooms CFO. Explain the results in January and February. Provide your recommendation for either static or flexible budgets. Provide explanations and backup for your recommendation. Note: A letter to the CFO should have correct spelling and grammar, and is expected to be approximately 400 words. Thorough explanations with backup are required.

Here is the data that Vroom-Vroom used for their budgets: Monthly Budget Data: Selling price per unit: Raw Material Costs Packaging Costs Electricity Waste and Other Costs Salary and Wages Costs Fringe Benefits Rent Costs Insurance Costs Depreciation Costs $79.00 per each $34.00 per each $12.00 per each $6.00 per each $8.00 per each $550,000 per month 50% of Salaries $900,000 per month $50,000 per month $380,000 per month Here are the Actual Results in January and February: Actual Data: Production (Units) Revenue Raw Materials Packaging Materials Electricity Waste and Other Costs Wages Fringe Benefits Rent Insurance Depreciation January February 235,000 177,000 $ 18,495,000 $13,995,000 $ 7,735,000 $ 5,843,000 $ 2,870,000 $ 2,197,000 $ 1,485,000 $ 962,000 $ 1,985,000 $ 1,452,000 $ 550,000 $ 560,000 $ 275,000 $ 280,000 $ 900,000 $ 900,000 $ 50,000 $ 55,000 $ 380,000 $ 390,000