totaled 14,000 units. The manager was very excited about the unexpected additional income that the extra 4,000 2. At the beginning of the period, Cambridge Company estimated that sales would be 10,000 units. Actual sales units would produce. Imagine her surprise upon seeing the following report: Number of units Static Budget Actual Results Sales 10,000 14,000 Less variable costs: $ 500.000 $ 600.000 Materials 120,000 164,000 Labor Overhead 100,000 134,000 50,000 72.000 Selling and administrative 30,000 Contribution margin $ 210,000 $ 200,000 Less fixed costs: Manufacturing 30,000 32,000 Selling and administrative 60,000 56,000 Net income $ 120,000 $ 112.000 The company's owner is very upset, charging that the manager did a lousy job of controlling costs. Required: 20.000 1) Prepare a performance report that can be used to evaluate the owner's charge that the manager did a poor job of controlling costs. Be sure to label variances as favorable or unfavorable. 2) Is the owner justified in charging the manager with poor cost control? Why or why not? See the template on the next page to submit your answer. Flexible Budget Flexible Budget Variances Actual Results or favorable Number of units 14,000 Sales 14.000 $ 600,000 Less variable costs: Materials 164,000 Labor 134,000 Overhead 72.000 Selling and administrative 30.000 Contribution margin $ 200,000 32.000 Less fixed costs: Manufacturing Selling and administrative Net income 56,000 $112.000