The CEO is convinced of the Director of Sales' ability to achieve a profit of $40,000 a month and reports those costs on the company's static budget. However, actual sales for the first month were 12,900 units. The actual revenues and expenses for the month were: VARIABLE COSTS (per unit) Sales: Direct Materials: Direct Labor: Indirect Materials: Indirect Labor: Utilities for Factory: Supplies for Factory: Variable Administrative Salaries Variable Sales Commissions: FIXED COSTS (per month) Factory Supervisor Salaries: Factory Depreciation: Property Taxes (Factory): Insurance (Factory): Maintenance (Factory): Fixed Sales Salaries Depreciation, Sales Equip. Advertising $237,457 $15,200 $58,050 $1,305 $2,200 $8,900 $1,925 $9,702 $14,760 $43,000 $15,500 $4,500 $3,500 $1,860 $10,000 $12,250 $5,720 Requirement 4 (40 points) 1. Prepare a report showing the revenue and spending and activity variances for each cost, including total and net income amounts. (Remember, you will need to prepare a flexible budget for the actual level of activity in order to complete this report.) 2. Based on your report, answer the following: a. Look at the Revenue Variance in conjunction with the Selling Expense variances. What is a possible explanation for these variances? b. Are the Activity Variances mostly favorable or unfavorable? Is this a good thing? What do activity variances tell us about the company's performance? C. What do you notice about the FIXED activity variances? Why is this the case? d. What do the Direct and Indirect Materials spending variances indicate about the company's use of materials? e. What do the Direct and Indirect Labor spending variances indicate about the company's laborers? f. Overall, how well did the company perform in the first month with regard to sales of the Whack-O? Number of units Revenue Total variable costs Total fixed costs Total costs Net income FLEXIBLE BUDGET 11,700 9,200 $170,200 78,200 92,000 170,200 0 $216,450 99,450 92,000 191,450 25,000 13,200 $244,200 112,200 92,000 204,200 40,000