John Richardson is the manufacturing production supervisor for Campbell Tool Works, a company that manufactures hand tools for mechanics. Trying to explain why he did not get the year-end bonus that he had expected, he told his wife, This is the dumbest place I've ever worked. Last year the company set up this budget assuming it would sell 250,800 units. Well, it sold only 240,800. 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 250,800 units goal and it sells 260,800. The company's making all kinds of money. You'd think I'd get this big fat bonus. Instead, management tells me I used more materials and labor than was budgeted. They said the company would have made a lot more money if I'd stayed within my budget. I guess I gotta wait for another bad year before I get a bonus. Like I said, this is the dumbest place I've ever worked." Campbell's master budget and the actual results for the most recent year of operating activity follow. Master Budget 250,000 3,762,000 Actual Results 260,800 $4,016, 320 Variances For 10,000 254,320 Number of units Sales revenue Variable manufacturing costs Materials Labor Overhead Variable selling, general and administrative costs Contribution margin Tixed costs Manufacturing overhead Selling general and administrative costs Not income (601,920) (313,500) (338,580) (476,520) 2,031,480 (623,920) (322,000) (355,780) 502.5201 2,212,100 22,000 8.500 17,200 26,000 180.620 u (1,279,080) (471,504) 280.896 (1,277,080) (462204 472.816 2.000 9,300 $ 191.920 U $ Required c. Prepare a flexible budget and recompute the budget variances. (Indicate the effect of each variance by selecting "U" for unfavorable, and "None" for no effect (.e., zero variance).) for favorable Required c. Prepare a flexible budget and recompute the budget variances. (Indicate the effect of each variance by selecting "P" for favorable, "U" for unfavorable, and "None" for no effect (.e., zero variance).) Variances Flexible Budget 260,800 Number of Units Actual Results 260,800 $ 4,016,320 Sales revenue Variable manufacturing costs Materials Labor Overhead Variable Selling. general & administrative Contribution margin Fixed costs Manufacturing overhead (623,920) (322,000) (355,780) (502,520) 2,212,100 Seng. general administrative Net income (1,277.080) (462,204) 472,8167