ABC Publications established the following standard price and costs for a hardcover picture book that the company produces.

Standard price and variable costs
Sales price	$	36.70
Materials cost		8.30
Labor cost		3.50
Overhead cost		6.00
Selling, general, and administrative costs		6.70
Planned fixed costs
Manufacturing overhead	$	131,000
Selling, general, and administrative		48,000

ABC planned to make and sell 36,000 copies of the book.

Required:

Prepare the pro forma income statement that would appear in the master budget and also flexible budget income statements, assuming production volumes of 35,000 and 37,000 units. Determine the sales and variable cost volume variances, assuming volume is actually 37,000 units. Indicate whether the variances are favorable (F) or unfavorable (U).

Master BudgetFlexibie Budgets Volume Variances Number of units 36,000 35,000 37,000 ales revenue Variable manufacturing costs Materials Labor Manufacturing overhead Variable selling general, and administrative costs Contribution margin Fixed costs Manufacturing overhead Fixed selling, general, and administrative costs