Paynesville Corporation manufactures and sells a preservative used in food and drug manufacturing. The company carries no inventories. The master budget calls for the company to manufacture and sell 120,000 liters at a budgeted price of $225 per liter this year. The standard direct cost sheet for one liter of the preservative follows.

Direct materials	(2 pounds @ $14)	$	28
Direct labor	(0.5 hours @ $44)		22

Variable overhead is applied based on direct labor hours. The variable overhead rate is $120 per direct-labor hour. The fixed overhead rate (at the master budget level of activity) is $60 per unit. All non-manufacturing costs are fixed and are budgeted at $2.2 million for the coming year.

At the end of the year, the costs analyst reported that the sales activity variance for the year was $690,000 unfavorable.

Required Prepare a flexible budget for Paynesville for the year. (Enter your answers in thousands of dollars.)

Required Prepare a flexible budget for Paynesville for the year. (Enter your answers in thousands of dollars.) PAYNESVILLE CORPORATION Flexible Budget (thousands of dollars) Sales revenue Variable costs: Direct labor Materials Variable overhead Total variable costs Contribution margin Fixed costs: Manufacturing overhead Non-manufacturing $ 7,200 2,200 Total fixed costs Operating profits $ $ 9,400 (9,400)