Beverage Products Company specializes in 12-ounce drinking glasses. The president asks the controller to prepare a performance report for April. The following report was handed to her a few days later:

In discussing the report with the controller, the president stated, “Profits have been decreasing in recent months, but this report indicates that our production process is operating efficiently.”

Required

1. Prepare a flexible budget for the company using production levels of 45,000 units, 50,000 units, and 55,000 units.

2. What is the flexible budget formula?

3. Assume that the company produced 45,560 units in April and that all fixed costs remained constant. Prepare a revised performance report similar to the one above, using actual production in units as a basis for the budget column. (Do not round your answers.)

4. Which report is more meaningful for performance evaluation, the original one or the revised one?Why?

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Cost Category (Variable Unit Cost) Direct materials ($0.10) Direct labor ($0.12) Variable overhead: Budgeted Actua Difference Under Costs Costs 5,000 4,975 5,850 (Over) Budget 25 150 6,000 Indirect labor ($0.03) Supplies ($0.02) Heat and power ($0.03) Other ($0.05) 1,500 1,000 1,500 2,500 1,290 960 1,325 2,340 210 40 175 160 Fixed overhead: Heat and power Depreciation Insurance and taxes Other 3,500 4,200 1,200 1,600 $28,000 27,240 3,500 4,200 1,200 1,600 Totals $760 Based on normal capacity of 50,000 units.