Question 2 The Driver's Club master budget and actual operating profit for 2020 is listed below: A B D 1 Master Budget 100,000 Actual 80,000 2 Sales (units) $840,000 $1,000,000a 329,680 68,000 $397,680 $442,320 380,000b 90,000c 470,000 530,000 $ $ 4 Sales revenue 5 Less 6 Variable costs 7 Variable manufacturing costs 8 Variable selling and administrative 9 Total variable costs 10 Contribution margin 11 Fixed costs 12 Fixed manufacturing overhead 13 Fixed selling and administrative costs 14 Total fixed costs 15 Profit 16 17 Calculation for master budget: 18 (a) 100,000 units at $10.00 per unit. 19(b) 100,000 units at $ 3.80 per unit. 20 (c) 100,000 units at $0.90 per unit. 21 195,500 132,320 $327,820 $114.500 200,000 140,000 $340,000 $190.000 Driver's Club CEO is concerned about the decrease in profit from budgeted to actual operating results. Revenue is $160,000 below budgeted, and profit is $75,500 below projected net income. Driver's Club CEO has come to your and asked for your advice. The CEO informed you the Director of Sales is responsible for units sold and selling expenses. The Director of Revenue management is responsible for price goods are sold. In addition, the plant supervisor is responsible for manufacturing costs. The CEO wants to know which of the management group should be fired and asks you to provide the data to back up her actions. Required: 1. Construct a Flexible Budget Performance Report. 2. Calculate the Volume (Activity), Revenue, and Spending Variances. 3. Write a Memo to the CEO as to what she should do and why. Check Figures: Activity variance - $ 106,000 U as to net income Revenue Variance - $40,000 as to Sales Dollars Spending Variance - $21,680U as to Variable Costs of which $25,680U relates to variable manufacturing and $4,000 F variable selling costs. Fixed Manufacturing is $4,500F and Fixed Selling $7,680F for a total Fixed Cost variance of $12,180F. Net income is $22,500F as a result of favorable revenue and spending variances