Daytona Wheels is a Japanese tire manufacturer. For August 2021, it budgeted to manufacture and sell 3,000 tires at a variable cost of $74 per tire and total fixed costs of $54,000. The budgeted selling price was $110 per tire. Actual results in August 2021 were 2,800 tires manufactured and sold at a selling price of $112 per tire. The actual total variable costs were $229,600, and the actual total fixed costs were $50,000.

Required

1. Prepare a performance report (similar to Exhibit 7-2,) with a flexible budget and a static budget.

2. Comment on the results in requirement 1.

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Level 2 Analysis Units sold Revenues Variable costs Direct materials Direct manufacturing labor Variable manufacturing overhead Total variable costs Contribution margin Fixed manufacturing costs Operating income Level 2 Level 1 Actual Results (1) 10,000 $1,250,000 621,600 198,000 130,500 950,100 299,900 285,000 $ 14,900 Flexible-Budget Variances (2)=(1)-(3) 0 $50,000 F 21,600 U 38,000 U 10,500 U 70,100 U 20,100 U 9,000 U $29,100 U Flexible Budget (3) $29,100 U Flexible-budget variance oF- favorable effect on operating income, U=unfavorable effect on operating incomo 10,000 $1,200,000 600,000 160,000 120,000 880,000 320,000 276,000 44,000 Sales-Volume Variances (4) = (3)-(5) $93,100 U Static-budget variance 2,000 U $240,000 U 120,000 F 32,000 F 24,000 F 176,000 F 64,000 U 0 $ 64,000 U $ 64,000 U Sales-volume variance Static Budget (5) 12,000 $1,440,000 720,000 192,000 144,000 1,056,000 384,000 276,000 $ 108,000