Home Products Company manufactures a complete line of kitchen glassware. The Beverage Division specializes in 12-ounce drinking glasses. Erin Fisher, the superintendent of the Beverage Division, asked the controller to prepare a report of her division's performance in April. The following report was handed to her a few days later:

*Based on normal capacity of 50,000 units.
In discussing the report with the controller, Fisher 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 Beverage Division 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 Beverage Division produced 46,560 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.
4. Manager Insight: Which report is more meaningful for performance evaluation, the original one above or the revised one? Why?

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Budgeted Costs Cost Category Difference Under (Over) Budget $ 25 150 Actual Costs (Variable Unit Cost) Direct materials (Ş.10) S 5,000 4,975 5,850 Direct labor (S.12) Variable overhead 6,000 Indirect labor ($.03) Supplies ($.02) 1,500 1,000 Heat and power ($.03) ,500 2,500 1,290 960 1,325 2,340 210 40 175 160 Other (S.05) 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