8-33 Flexible budget variances. Mercy Enterprise is a knitting company based in Dublin, Ireland. The following is the static budget and actual results of Mercy Ltd. for the month of April 2020. Actual Results Static-Budget Amounts Units 40,000 30,000 Revenue () 236,000 180,000 Variable Costs: () Material 76,000 60,000 Labor 63,200 45,000 Factory Overhead 34,000 24,000 Contribution Margin 62,800 51,000 Fixed Cost: () Factory Overhead 12,880 12,000 Office Expenses 22,000 20,000 Operating Income 27,920 19,000 Mercy's management is pleased with the income which is higher than budgeted. However, they understand that significant increase in units sold renders the comparison of actual results and the static budget unfair. 1. Prepare a flexible budget at actual level of output and calculate flexible budget variances. 2. Comment on the budget results.