1.Determining sales and variable cost volume variances Todhunter Publications established the following standard price and costs for hardcover picture book that the company produces. Standard price and variable: Sales price $36.00 Materials 9.00 Labor 4.50 Overhead 6.30 General, selling, and administrative 7.20 Planned fixed costs: Manufacturing $135,000 General, selling, and administrative 54,000 Todhunter planned to make and sell 30,000 copies of the book. Required a. Prepare the pro forma income statement that would appear in the master budget. b. Prepare flexible budget income statements, assuming volumes of 29,000 and 31,000 units c. Determine the sales and variable cost volume variances, assuming volume is actually 31,000 units. d. Indicate whether the variance are favorable (F) or unfavorable (U) e. Comment on how Todhunter could use the variances to evaluate performance. Problem2. Determining and interpreting flexible budget variances Use the standard price and cost data supplied in Problem above. Assume that Todhunter actually produced and sold 31,000 books. The actual sales price and costs incurred follow. Actual price and variable costs: Sales price $35.00 Materials 9.20 Labor 4.40 Overhead 6.35 General, selling, and administrative 7.00 Planned fixed costs: Manufacturing $120,000 General, selling, and administrative 60,000 Required a. Determine the flexible budget variances. b. Indicate whether each variance is favorable (F) or (U). c. Identify the management position responsible for each variance. Explain what could have caused the variance Problem 3. Flexible budget planning Luke Chou, the president of Digitech Computer Services needs your help. He wonders about the potential effects on the firms net income if he changes the service rate that the firm charges its customers. The following basic data pertain to fiscal year 2012. Standard rate and variable costs: Service rate per hour $80.00 Labor 40.00 Overhead 7.20 General S&A 4.30 Expected fixed costs: Facility repair $525,000.00 General S&A 150,000.00 Required. Prepare the pro forma income statement that would appear in the master budget if the firm expects to provide 30,000 hours of services in 2012. A marketing consultant suggests to Mr. Chou that the service rate may affect the number of service hours that the firm can achieve. According to the consultants analysis, if Digitech charges customers $75 per hour, the firm can achieve 38,000 hours of services. Prepare a flexible budget using the consultants assumption. The same consultant also suggests that if the firm raises its rate to $85 per hour, the number of service hours will decline to 25,000. Prepare a flexible budget using the new assumption. Evaluate the three possible outcomes you determined in Requirements a, b, and c and recommend a pricing strategy