Stapp Educational Services had budgeted its training service charge at $80 per hour. The company planned to provide 30,000 hours of training services during 2009. By reducing the service charge to $70 per hour, the company was able to increase the actual number of hours to 31,500.

Required

a. Determine the sales volume variance, and indicate whether it is favorable (F) or unfavorable (U).

b. Determine the flexible budget variance, and indicate whether it is favorable (F) or unfavorable (U).

c. Did reducing the price of training services increase profitability? Explain.