7. Jasmin Sylvera is the manufacturing production supervisor for Walton Motor Works (WMW), a company that manufactures electrical motors for industrial applications. Trying to explain why she did not get the year-end bonus that she had expected, she told a friend. "This is the dumbest place I've ever worked. Last year the company set up this budget assuming it would sell 153,600 units. Well, it sold only 143,600. The company lost money and gave me a bonus for not using as much materials and labor as was called for in the budget. This year, the company has the same 153,600 units goal and it sells 163,600. The company's making all kinds of money. You'd think I'd get a big bonus. Instead, management tells me I used more materials and labor then was budgeted. They said the company would have made a lot more money if I'd stayed within my budget. I guess I'll have to wait for another bad year before I get a bonus. Like I said, this is the dumbest place I've ever worked." Sales revenue Materials Ok WMW's master budget and the actual results for the most recent year of operating activity follow. ces Number of units Variable manufacturing costs Master Budget 153,600 $ 33,792,000 (4,915,200) (4,300,800) (2,150,400) (5,376,000) Actual Results 163,600 $ 36,319,200 (5,419,000) Variances 10,000 $ 2,527,200 For U F (4,499,000) 503,800 198,200 U U (2,342,000) 191,600 U (5,573,000) 197,000 U 17,049,600 18,486,200 1,436,600 F (8,017,920) (7,136,000) $1,895,680 (7,925,000) (7,173,000) $ 3,388,200 92,920 F 37,000 5 $1,492,520 F Labor Overhead Variable selling, general, and administrative costs Contribution margin Fixed costs Manufacturing overhead Selling, general, and administrative costs Net income Required c. Prepare a flexible budget and recalculate the budget variances. Note: Indicate the effect of each variance by selecting "F" for favorable, "U" for unfavorable, and "None" for no effect (i.e., zero variance). Number of units Sales revenue Flexible Budget Actual Results Variances $ 163,600 36,319,200 Variable manufacturing costs Materials (5,419,000) Labor (4,499,000) Overhead (2,342,000) Variable selling, general & administrative (5,573,000) 18,486,200 Contribution margin Fixed costs Manufacturing overhead i (7,925,000) Selling, general & administrative (7.173,000) Net income $ 3,388,200