Curtis Salter, the president of Kasimer 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 2015.

Standard rate and variable costs
Service rate per hour	$	88.00
Labor cost		32.00
Overhead cost		7.20
Selling, general, and administrative cost		4.20
Expected fixed costs
Facility maintenance	$	520,000
Selling, general, and administrative		141,000

Required

a.	Prepare the pro forma income statement that would appear in the master budget if the firm expects to provide 40,000 hours of services in 2015.

b.	A marketing consultant suggests to Mr. Salter that the service rate may affect the number of service hours that the firm can achieve. According to the consultants analysis, if Kasimer charges customers $83 per hour, the firm can achieve 45,000 hours of services. Prepare a flexible budget using the consultants assumption.

c.	The same consultant also suggests that if the firm raises its rate to $93 per hour, the number of service hours will decline to 33,000. Prepare a flexible budget using the new assumption.