Chillcott Manufacturing produces ceiling fans. A master budget was prepared by the controller based on sales of 19,500 fans for the month of May. The budgeted income statement for the period follows:
| Budgeted Income Statement | |
| Revenue | | $3,120,000 |
| Variable expenses | | |
| Direct materials | $877,500 | |
| Direct labor | 390,000 | |
| Variable overhead | 585,000 | |
| Total variable expenses | | 1,852,500 |
| Contribution margin | | 1,267,500 |
| Fixed overhead | 325,000 | |
| Fixed selling and administrative expenses | 650,000 | |
| Total fixed expenses | | 975,000 |
| Operating income | | $ 292,500 |
During May, Chillcott produced and sold 23,400 fans and had the following actual results:
| Revenue | | $3,731,000 |
| Variable expenses | | |
| Direct materials | $1,037,400 | |
| Direct labor | 487,500 | |
| Variable overhead | 715,000 | |
| Total variable expenses | | 2,239,900 |
| Contribution margin | | 1,491,100 |
| Fixed overhead | 351,000 | |
| Fixed selling and administrative expenses | 650,000 | |
| Total fixed expenses | | 1,001,000 |
| Operating income | | $ 490,100 |
Required:
| a. | Prepare a flexible budget for May. |
| b. | Calculate Chillcott's static budget variance for May. |
| c. | Will the static budget variance that you calculated in part (b) be useful to |
management?
Why or why not?
| d. | Based on the available information, prepare a performance report for management. |
| e. | Comment on the results of your report. |
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