The management of Vernon Modems, Inc. (VMI) is uncertain as to the volume of sales that will exist in Year 1. 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 following form.

Required

1. Complete the following worksheet to prepare the appropriate flexible budgets.

2. Calculate and show the flexible budget variances for the static budget versus the flexible budget at 6,000 units.

3. Indicate whether each variance is favorable (F) or unfavorable (U). (Select "None" if there is no effect (i.e., zero variance).)