You have been called in as a consultant for Palo, Inc a manufacturer of shower radios. Although Palo's management is very happy they reported $2,478 more in net operating income for the month than expected, they want to know why net operating income is higher especially since demand for the radios dropped. Information regarding the most recent month follows:

	budget	actual
Units	11000	10500
Sales	$ 440000	$ 430500
Variable expenses
Variable cost of goods sold	$ 352000	339297
Variable selling expenses	$ 33000	34125
Total expenses	$ 385000	373422
Contribution margin	$ 55000	57078

Fixed expenses
Fixed Cost of goods sold	$30000	29400
Fixed Cost of goods sold	$12000	12200
Total Fixed cost	$42000	41600
Net Operating Incom	$13000	15478

Standard Information:

Particulars	Quantity	Price/Rate	Standard Cost
Direct Materials	2.0 Pounds	$5 per pound	$10
Direct Labor	1.5 Hours	$14 per hour	$21
Variable manafacturing overhead	0.50 Machine Hours	$2 per MH	$1
Total Standard Cost			$32.00

Actual Information:

Actual quantity of materials used and purchased is 23,100 pounds.

Actual amount spent on direct materials is $117,117

Average rate paid for direct labor for the month was $14.40 per hour

The only variance in variable manufacturing overhead was due to activity level.

Required:

Prepare a memo, in good form, to Palo's management explaining why actual net income was higher than budget. Also make a recommendation as to what items they might want to investigate using a 5% variance from the flexible budget as your guide. Keep these things in mind when preparing your memo:

1) You should provide specific evidence to support your explanation.

2) Explanations should lead with the item having the most significant impact.

3) Your memo should be prepared in good form. Remember to use the guidelines provided from the previous memo assignment.

4) You need to include a visual( a graph) to help communicate your explanation and/or recommendation.

Keep in mind that Palo's Management are not accountants but possess general business knowledge(explain in layman's terms).

this is all the data/info/details that are given; which is why I am seeking help lol.