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 11,000 10,500 Sales Variable Expenses 440,000 430,500 Variable Cost of Goods Sold 352,000 $339,297 34,125 $373,422 57,078 Variable Selling expenses Total Variable Expenses Contribution Margin Fixed Expenses $33,000 $385,000 55,000 Fixed Cost of Goods Sold Fixed Selling and Administration 30,000 12,000 42,000 13,000$ 29,400 12,200 41,600 Total Fixed Expenses Net Operating Income(NOI) 15,478 Palo Inc. uses a standard costing system and information regarding the standards for variable product costs are given beloww Standard Information: Standard Quantity 2.0 Pounds 1.5 Hours Price/Rate 5.00 per pound 14.00 per hour $2.00 per MH Cost Direct Materials Direct Labor Variable manufacturing Overhead0.5 Mach hrs Total Standard Variable Costs 10.00 $21.00 $1.00 532.00 Additional 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 Hint: You should be preparing a performance report as well as examining the direct material and direct labor variances. In order to do this, you will need to break apart variable cost of goods sold into its 3 individual components. 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 knowledgefexplain in layman's terms) 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 11,000 10,500 Sales Variable Expenses 440,000 430,500 Variable Cost of Goods Sold 352,000 $339,297 34,125 $373,422 57,078 Variable Selling expenses Total Variable Expenses Contribution Margin Fixed Expenses $33,000 $385,000 55,000 Fixed Cost of Goods Sold Fixed Selling and Administration 30,000 12,000 42,000 13,000$ 29,400 12,200 41,600 Total Fixed Expenses Net Operating Income(NOI) 15,478 Palo Inc. uses a standard costing system and information regarding the standards for variable product costs are given beloww Standard Information: Standard Quantity 2.0 Pounds 1.5 Hours Price/Rate 5.00 per pound 14.00 per hour $2.00 per MH Cost Direct Materials Direct Labor Variable manufacturing Overhead0.5 Mach hrs Total Standard Variable Costs 10.00 $21.00 $1.00 532.00 Additional 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 Hint: You should be preparing a performance report as well as examining the direct material and direct labor variances. In order to do this, you will need to break apart variable cost of goods sold into its 3 individual components. 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 knowledgefexplain in layman's terms)