John Richardson is the manufacturing production supervisor for Torsion Tool Works (TTW), a company that manufactures hand to 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 I've ever worked. Last year the company set up this budget assuming it would sell 250,000 units. Well, it sold only 240.000. 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, th company has the same 250,000 units goal and it sells 260.000. The company's making all kinds of money. You'd think I'd get this 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, th the dumbest place I've ever worked." TTW's master budget and the actual results for the most recent year of operating activity follow. For U Master Budget 250,000 $ 3,750,000 Actual Results 260.00 $ 3,950,000 Variances 1e, ce $ 200,000 u Number of units Sales revenue Variable manufacturing costs Materials Labor Overhead Variable selling, general and administrative costs Contribution margin Fixed costs Manufacturing overhead Selling, general and administrative costs et Income (600,000) (312,500 (337,500 (075,000 2,025,000 (622, 200) (321, 000) (354,700) (501, 300) 2,150,00 22, 200 8,5ee 17,200 26300 125,800 F (1,275,000 (670.000 280,000 (1,273,100) (679,300) 398, 400 1.900 2.300 $ 118,400 F U $ 5 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 (1.e. zero variance).) Flexible Budget Variances Actual Results 200,000 Number of Units