The fixed budget performance report for the year ended 30 June 2020 for Motueka Mint is as follows.

Required

(a) Convert the fixed budget performance report prepared by Motueka Mint to a flexible budget performance report.

(b) Why does a report based on a flexible budget provide a better means of evaluating performance as opposed to a fixed budget?

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Units of production: Factory overhead: Variable costs: Budget 84000 Actual 94000 Variance 10000 F Indirect labour Factory supplies Repairs and maintenance Total variable overhead Fixed costs: Factory insurance Utilities Depreciation Management salaries $193200 134400 67 200 394800 12000 $216200 178 600 112800 507 600 $ 23000 U 44200 U 45 600 U 112800 U 700 F 6000 U 12200 U $125000 U 18600 14500 13500 24000 13800 1500 U 5400 U 86000 92 000 Total fixed overhead 131 100 143300 Total factory overhead $525 900 $650 900 U indicates an unfavourable variance. F indicates a favourable variance.