ReelTime distributes DVDs to movie retailers, including dot-coms. ReelTimeâ??s top management meets

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ReelTime distributes DVDs to movie retailers, including dot-coms. ReelTime’s top management meets monthly to evaluate the company’s performance. Controller Terri Lon prepared the following performance report for the meeting.REELTIME, INC.Income Statement Performance ReportMonth Ended July 31, 2007 Actual Results Static Budget Variance_Sales Revenue $1,640,000 $1,960,000 $320,000 FVariable Costs:Variable Costs: 773,750 980,000 206,250 FSales Commissions 77,375 107,800 30.425 FShipping Expense 42,850 53,900 11,050 FTotal Variable Costs 893,975 1,141,700 247,725 FFixed Costs:Salary Expense 311,450 300,500 10,950 UDepreciation Expense 208,750 214,000 5,250 FRent Expense 128,250 108,250 20,000 UAdvertising Expense 81,100 68,500 12,600 UTotal Fixed Costs 729,550 691,250 38,300 UTotal Expenses 1,623,525 1,832,950 209,425 FOperating Income $ 16,475 $ 127,050 $110,575 ULon also revealed that the actual sales price of $20 per movie was equal to the budgeted sales price and that there were no changes in inventories for the month.Management is disappointed by the operating income results. CEO Lyle Nesbitt exclaims, “How can actual operating income be roughly 13% of the static budget amount when there are so many favorable variances?â€Requirements1. Prepare a more informative performance report. Be sure to include a flexible budget for the actual number of DVDs bought and sold.2. As a member of ReelTime’s management team, which variances would you want investigated? Why?3. Nesbit believes that many consumers are postponing purchases of new movies until after the introduction of a new format for recordable DVD players. In light of this information, how would you rate the company’s performance?Your written response should be no more than two type written pages (double spaced) plus the necessary performance report. Be careful with you spelling and grammar.Accounting 3270, Spring, 2011Case III.ReelTime distributes DVDs to movie retailers, including dot-coms. ReelTime’s top management meetsmonthly to evaluate the company’s performance. Controller Terri Lon prepared the following performancereport for the meeting.REELTIME, INC.Income Statement Performance ReportMonth Ended July 31, 2007Actual ResultsSales RevenueStatic BudgetVariance_$1,640,000$1,960,000$320,000 F773,75077,37542,850980,000107,80053,900206,250 F30.425 F11,050 F893,9751,141,700247,725 FVariable Costs:Variable Costs:Sales CommissionsShipping ExpenseTotal Variable CostsFixed Costs:Salary ExpenseDepreciation ExpenseRent ExpenseAdvertising Expense311,450208,750128,25081,100300,500214,000108,25068,50010,9505,25020,00012,600Total Fixed Costs729,550691,25038,300 UTotal Expenses1,623,5251,832,950209,425 FOperating Income$$ 127,050110,575 U16,475UFUULon also revealed that the actual sales price of $20 per movie was equal to the budgeted sales price andthat there were no changes in inventories for the month.Management is disappointed by the operating income results. CEO Lyle Nesbitt exclaims, “How canactual operating income be roughly 13% of the static budget amount when there are so many favorablevariances?â€Requirements1. Prepare a more informative performance report. Be sure to include a flexible budget for the actualnumber of DVDs bought and sold.2. As a member of ReelTime’s management team, which variances would you want investigated? Why?3. Nesbit believes that many consumers are postponing purchases of new movies until after theintroduction of a new format for recordable DVD players. In light of this information, how would you ratethe company’s performance?Instructions1. Place your written responses to each requirement in a type written document that is double spacedand no more than two pages long.2. For requirements (1) which requires you to prepare a Performance Report, please attach aworksheet to your submission containing all of your Report. Please prepare the Report using Excel.3. Requirements (2) and (3) ask you to opine on certain of your findings and to make suggestions aboutwhat the company should do. Your responses should be clearly written and easily understood.Grammar and spelling will count.4. The assignment is worth 25 points. Points will be earned in the following manner:Accuracy of answers for requirements (1)Quality and reasonableness of opinions expressed in (2) & (3)Grammar, spelling, and use of language5. Due date of assignment: Thursday, April 7, 201110 pts.10 pts.5 pts.25 pts.

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