Analysis and explanations can be included in the Excel cells orin a textbox. The submission should be one Excel file only. Noadditional files should be submitted. Use contribution marginincome statement formatting. LiveColor is preparing their 2019budget. They estimate sales/production will be between 700,000 and900,000 boxes of markers per month. LiveColor wants to look at bothstatic budgets and flexible budgets to determine which is best forthem. They have struggled in the past with determining whetherbudget variances were related to volume being above or below budgetvs whether they are spending too much or too little on expenses.They want to be able to understand their budget variances in orderto make better decisions. Note: Treat Salary and Wages Costs asFixed Expenses.

Question 1: Prepare some budgets in Excel for LiveColor. (20points) a) Show the static budget based on 800,000 units (boxes)produced. b) Show what the flexible budget would be if 700,000units (boxes) were produced. c) Show what the flexible budget wouldbe if 900,000 units (boxes) were produced. d) Show the flexiblebudget cost formula(s) for LiveColor. e) Explain the differencebetween static and flexible budgets and when each should beused.

Question 2: The month of January 2019 is complete, and LiveColorwants to compare their budget to their actual results. Actualresults are shown in the table above. (30 points) a) CompareJanuary’s actual results to the static budget you created inQuestion 1. a). Analyze the static budget variances by comparingthe static budget to the actual results. b) Break out price andvolume variance amounts for each line item. c) For the staticbudget variances, indicate whether each line item is favorable orunfavorable. Provide possible explanations. d) Create the flexiblebudget based on the actual units produced for January. e) Comparethe actual results to the flexible budget for January that youcreated in Question 2d. Analyze the flexible budget variances bycomparing the flexible budget to the actual results. f) For theflexible budget variances, indicate whether each line item isfavorable or unfavorable. Provide possible explanations. g)LiveColor wants to determine whether they should use a flexiblebudget or a static budget going forward. Write a memo to their CFOexplaining some pros and cons of each option. Provide arecommendation including the reason(s) you recommend thatapproach.

Question 1 Chart Monthly Budget Selling

Price per unit-----5.00 per box Raw material cost-----1.50 perbox Packaging Cost----.80 per box salary and wage cost----300,000per month ot for product over 800,000 units---0.70 per box fringebenefits-----50% off wage and OT electricity---.20 per box wasteand other cost---.10 per box rent cost---500,000 per monthinsurance cost----60,000 per month depreciation cost---240,000 permonth

Question 2 Chart

Production---825,000 per box Sales---4,070,000 Ingredientscost---1,132,450 packaging cost---658,250 salary and wagecost---280,000 OT---48,750 Fringe benefits---164,375electricity---158,780 waste and other cost--138,352 rentcost---500,000 insurance cost--65,000 depreciationcost---240,000