Vanadium Audio Inc. is a small manufacturer of electronic musical instruments. The plant manager received the following variable factory overhead report for the period: Budgeted Variable Factory Overhead at Actual Production Controllable Supplies Power and light Indirect factory wages Total Actual 42,000 52,500 39,100 $133,600 39,780 50,900 30,600 $121.280 Variance s 2,220U 1,600 U 8,500 U $12,320 U Actual units produced: 15,000 (90% of practical capacity) The plant manager is not pleased with the $12,320 unfavorable variable factory overhead controllable variance and has come to discuss the matter with the controller. The following discussion occurred: Plant Manager: I just received this factory report for the latest month of operation. I'nm not very pleased with these figures. Before these numbers go to headquarters, you and I will need to reach an understanding. Controller: Go ahead, what's the problem? Plant Manager: What's the problem? Well, everything. Look at the variance. It's too large. If I understand the accounting approach being used here, you are assuming tha my costs are variable to the units produced. Thus, as the production volume declines so should these costs. Well, I don't believe that these costs are variable at all. I think they are fixed costs. As a result, when we operate below capacity, the costs really do go down at all. I'm being penalized for costs I have no control over at all. I need this report to be redone to reflect this fact. If anything, the difference between actual and budget is essentially a volume variance. Listen, I know that you're a team player. Yo really need to reconsider your assumptions on this one. If you were in the controller's position, how would you respond to the plant manager