Question 6-Variance Analysis (15 marks) Assume that owners decided to go ahead with the Canmore expansion (first introduced in question 4). The junior accountant has prepared the following report to compare the static budget (from question 4) to the actual results. The owners have asked you to complete a variance analysis Required: Part A [4 marks). Create a Static Budget Report Variance Analysis, indicating whether variances are favorable (F) or unfavorable (U). All variance amounts should be shown as positive numbers. Static Budget Amount Actual Variance Results Amount Favorable or Unfavorable 4,024 5,260 Sales in Units Sales 503,000 $631,200 Less: Variable Costs Cost of Goods Sold 225,000 224.000 Sales Commissions 75.450 75.744 Total Variable Costs 300,450 299,744 Contribution Margin 202.550 331,456 Less: Fixed Costs Total Fixed Costs Net Operating Income 195.000 190,000 7.350 141454 What is the weakness of using a static budget report to evaluate performance? (2 marks) Required: Part B 16 marks)-The owners can see that the company sold a different amount of units than budgeted. They have asked you to create a flexible budget report. Sales in Units Sales Less: Variable Costs Cost of Goods Sold Sales Commissions Total Variable Costs Contribution Margin Less: Fixed Costs Net Operating Income Flexible Budget Amount Actual Variance Results Amount Favorable or Unfavorable (U) 5260 631,200 224.000 75,744 299,344 331456 190,000 141,456 Management was pleased on the results based on the static budget report. Should they be pleased? What does the flexible budget tell you? What are your recommendations to management based on the flexible budget report? (3 marks)