The management of Walton Modems, Inc. (WMI) is uncertain as to the volume of sales that will exist in 2017. The president of the company asked the chief accountant to prepare flexible budget income statements assuming that sales activity amounts to 4,000 and 7,000 units. The static budget is shown in the form below.

Required

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

b. Calculate and show the flexible budget variances for the static budget versus the flexible budget at 7,000 units.

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

WALTON MODEMS, INC.
Flexible Budget Income Statements
	Cost per unit	Static Budget	Flexible Budgets		Volume Variance
Number of units		5,000	4,000	7,000
Sales revenue	$150	$750,000
Variable manufacturing costs:
Materials	45	225,000
Labor	30	150,000
Overhead	6	30,000
Variable selling, general & administrative	8	40,000
Contribution margin		305,000
Fixed costs:
Manufacturing rent		68,000
Depreciation on manufacturing equipment		78,000
Selling, general & administrative expenses		99,850
Depreciation on administrative equipment		30,000
Net income (loss)		$29,150	$(31,850)	$151,150