The management of Magnificent Modems, Inc. (MMI), is uncertain as to the volume of sales that will exist in 2014. The president of the company asked the chief accountant to prepare flexible budget income statements assuming that sales activity amounts to 3,000 and 6,000 units. The static budget is shown in the form below.

Required:

a.b.&c.

Complete the following worksheet to prepare the appropriate flexible budgets and show the flexible budget variances for the static budget versus the flexible budget at 6,000 units. Indicate whether each variance is favorable (F) or unfavorable (U). (Select "None" if there is no effect (i.e., zero variance).)

MAGNIFICENT MODEMS, INC.

Flexible Budget Income Statements
	Cost per unit	Static Budget	Flexible Budgets		Volume Variance
Number of units		4,000	3,000	6,000
Sales revenue	$150	$600,000
Variable manufacturing costs:
Materials	40	160,000
Labor	25	100,000
Overhead	5	20,000
Variable selling, general & administrative	7	28,000
Contribution margin		292,000
Fixed costs:
Manufacturing rent		67,000
Depreciation on manufacturing equipment		77,000
Selling, general & administrative expenses		98,300
Depreciation on administrative equipment		29,000
Net income (loss)		$20,700	$(52,300)	$166,700