Problem 2 Actual income statement information for 2015 is as follows: Sales Direct materials Direct labor Variable overhead Fixed costs Operating income $3,500,000 $500,000 $400,000 $300,000 $600,000 $1,700,000 A. Prepare a budget for 2016 assuming sales and variable costs increase by 30% and fixed costs increase by $200,000 Actual results for 2016 were as follows: Sales Direct materials Direct labor Variable overhead Fixed costs Operating income $3,200,000 $480,000 $380,000 $385,000 $600,000 $1,355,000 B. Prepare a flexible budget comparing the actual results for 2016 with the flexible budget for 2016 C. Calculate the variances for each line item in the budget in both dollar and percentage terms D. Comment on the variances