D F B E A C Question 6 - Variance Analysis (20 marks) Assume that owners decided to go ahead with the Canmore expansion (first introduced in question 4). The junior accountant has prepared the following report to compare the static budget (from question 4) to the actual results. The owners have asked you to complete a variance analysis. 3 4 Required: Part A (8 marks)- Create a Static Budget Report Variance Analysis, indicating whether variances are favorable (F) or unfavorable (U). All variance amounts should be shown as positive numbers. 5 Actual Variance Static Budget Amount Favorable or Unfavorable 6 Results Amount 7 Sales in Units 4,032 5,210 8 Sales $ 504,000 $ 625,200 9 Less: Variable Costs: 10 Cost of Goods Sold 219,000 215,000 11 Sales Commissions 65,520 87,528 12 Total Variable Costs 284,520 302,528 13 Contribution Margin 219,480 322,672 14 Less: Fixed Costs: 15 Advertising 23,000 25,000 16 Property Taxes 9,000 10,000 17 Rent 54,000 52,000 4 E A Case Intro Group Members 01 02 03 04 05. 06 Groun Member Evaluation V Calibri Light Ge 11 B BO A... y fax D E F A B Sales 625,200 Less: Variable Costs: Cost of Goods Sold 215,000 Sales Commissions 87,528 Total Variable Costs 302,528 Contribution Margin 322,672 Less: Fixed Costs: Advertising 25,000 Property Taxes 10,000 5 Rent 52,000 e Salaries & Wages 101,000 Total Fixed Costs 188,000 134,672 1 Net Operating Income 2 Management was pleased on the results based on the static budget report. Should they be pleased? What does the flexible budget tell you? What are your recommendations to management based on the flexible budget +3 report? (3 marks) 14