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2. Prepare a flexible budget. Analyze the actual performance and prepare your own comments on the way the performance report was originally prepared and the analysis and conclusions reached by Brenda Haines. Are there any flaws in her analysis? How would you do it better? What suggested changes would you make to the format of the performance report before sending it to the division manager and the company headquarters. The Performance Report for July At a glance, the performance report confirmed Elder's first fears. Instead of a budgeted profit of $67,200 for the month, the report showed the division had a loss of $8,100 in July. Even allowing for the lost volume form the lost contract, she had expected a better result than shown by the performance report. Brenda Haines, the plant accountant, had the following memo attached to the report. August 4, 2020 Judy: As we discussed, here is the performance report for July. I am sure you will find the bottom line disappointing, but plant performance really looks good and the teams really deserve our compliments. As shown on the report, they are under budget on every single cost category except for supervision. I think that the unfavorable variance in supervision is due to the extra work involved in controlling all of the other costs. The other information you requested is as follows: 1. There were no beginning or ending inventories in work in process or finished goods. 2. The per unit standard costs used in the budgeting process this year were: Direct material $9 Direct labor $18 3. Two hours of labor per unit is still used as the standard labor time 4. The actual cost of materials is actually 5% less than expected in July. 5. The actual labor cost per hour for July was $9.20 per hour due to the increase in the cost of health insurance premiums last March. Robson Motors Performance Report for July, 2020 Budget Actual Variance Units produced and sold 20,000 18,000 $ 1,060,000 $ 946,800 (113,200) U Sales Variable costs: Direct material Direct labor Indirect labor Idle time Cleanup time Miscellaneous supplies 180,000 360,000 66,000 20,000 12,000 7,800 163,500 342,000 58,800 18,800 11,200 8,800 16,500 F 18,000 F 7,200 F 1,200 F 800 F (1,000) U Variable manufacturing costs 645,800 603,100 42,700 F Variable shipping costs Total variable costs Contribution margin 34,000 679,800 380,200 32,100 635,200 311,600 1,900 F 44,600 F (68,600) U (5,700) U Fixed manufacturing costs Supervision Rent Depreciation Insurance on plant 66,500 24,000 68,000 17,500 72,200 24,000 68,000 18,500 (1,000) U Fixed manufacturing costs 176,000 182,700 (6,700) U Marketing and other administrative costs 137,000 137,000 Operating income/loss) 67,200 $ (8,100) (75,300) U 2. Prepare a flexible budget. Analyze the actual performance and prepare your own comments on the way the performance report was originally prepared and the analysis and conclusions reached by Brenda Haines. Are there any flaws in her analysis? How would you do it better? What suggested changes would you make to the format of the performance report before sending it to the division manager and the company headquarters. The Performance Report for July At a glance, the performance report confirmed Elder's first fears. Instead of a budgeted profit of $67,200 for the month, the report showed the division had a loss of $8,100 in July. Even allowing for the lost volume form the lost contract, she had expected a better result than shown by the performance report. Brenda Haines, the plant accountant, had the following memo attached to the report. August 4, 2020 Judy: As we discussed, here is the performance report for July. I am sure you will find the bottom line disappointing, but plant performance really looks good and the teams really deserve our compliments. As shown on the report, they are under budget on every single cost category except for supervision. I think that the unfavorable variance in supervision is due to the extra work involved in controlling all of the other costs. The other information you requested is as follows: 1. There were no beginning or ending inventories in work in process or finished goods. 2. The per unit standard costs used in the budgeting process this year were: Direct material $9 Direct labor $18 3. Two hours of labor per unit is still used as the standard labor time 4. The actual cost of materials is actually 5% less than expected in July. 5. The actual labor cost per hour for July was $9.20 per hour due to the increase in the cost of health insurance premiums last March. Robson Motors Performance Report for July, 2020 Budget Actual Variance Units produced and sold 20,000 18,000 $ 1,060,000 $ 946,800 (113,200) U Sales Variable costs: Direct material Direct labor Indirect labor Idle time Cleanup time Miscellaneous supplies 180,000 360,000 66,000 20,000 12,000 7,800 163,500 342,000 58,800 18,800 11,200 8,800 16,500 F 18,000 F 7,200 F 1,200 F 800 F (1,000) U Variable manufacturing costs 645,800 603,100 42,700 F Variable shipping costs Total variable costs Contribution margin 34,000 679,800 380,200 32,100 635,200 311,600 1,900 F 44,600 F (68,600) U (5,700) U Fixed manufacturing costs Supervision Rent Depreciation Insurance on plant 66,500 24,000 68,000 17,500 72,200 24,000 68,000 18,500 (1,000) U Fixed manufacturing costs 176,000 182,700 (6,700) U Marketing and other administrative costs 137,000 137,000 Operating income/loss) 67,200 $ (8,100) (75,300) U