The management accountant prepared the following performance report for a company's first year of operations:

BudgetActualVariance

Sales$250,000$270,000

Cost of Goods Sold160,000175,000

Selling Expenses30,00040,000

Administrative Expenses40,000 45,000_______

Operating Income$20,000$10,000

Required:(10 points)

(a)Compute variances for each line item on the income statement.Also indicate if the variances are Favorable (F)orUnfavorable (U).

(b)Assuming the use of the Management-by-Exception (MBE) approach, indicate which variances should be investigated further.