Brabham Enterprises manufactures tires for the Formula One motor racing circuit.
For August 2011, Brabham budgeted to manufacture and sell 3,000 tires at a variable cost of $74 per tire and a total fixed cost of $54,000. The budgeted selling price was $110 per tire. Actual results in August 2011 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 fixed costs were $50,000.
Required
2.1 Prepare a performance report that uses a flexible budget and static budget showing the different variances between the actual and the static budget and the flexible budget
2.2 Discuss the difference between a static budget and a flexible budget and comment on the results based on the performance report you have prepared for Brabham.