Company planned to produce and sell 40,000 units. At that volume level, variable costs are determined to be $320,000 and fixed costs are $30,000. The planned selling price is $10 per unit. Company actually produced and sold 42,000 units.

Required:

Using a contribution margin format:

a). Prepare a fixed budget income statement for the planned level of sales and production.

b). Prepare a flexible budget income statement for the actual level of sales and production.

c). Which budget should we use to compare to actual results, and why?