A fully licensed fireworks company located in Ontario has budgeted sales of $75,000, and expected expenses are as follows:

Cost of fireworks ..........................    $36,000

Labour cost ...................................      15,000

Other costs ...................................        8,000

Total costs ....................................    $59,000

Actual sales were $74,600, almost equal to the budget. The company spent $35,500 for fireworks, $18,000 for labour, and $7,910 for other costs.

1. Compute budgeted profit and actual profit.

2. Prepare a performance report to help identify those costs that were significantly different from the budget.

3. Suppose the company uses a management-by-exception rule. What costs deserve further explanation? Why?