Waterway Company's actual results reveal that it was profitable in the sale of its star product: a high$-$end spot$-$cleaning vacuum for upholstery. But it was not nearly as profitable as management had hoped. Waterway's actual income statement and master budget income statement are as follows. In order to keep the focus on product costs, SG&A costs were omitted.

$\backslash$table$[[,$Actual Results,Flexible Budget,Master Budget$],[$Units sold,$10,000,,12,000],[$Revenues$,$$$1,680,000,,$$$2,088,000],[$Variable costs$],[$DM$,562,400,,648,000],[$DL$,180,000,,172,800],[$Variable$-$MOH,$123,300,,134,400],[$Contribution margin,$814,300,,1,132,800],[$Fixed$-$MOH,$279,000,,268,800],[$Operating income,$$535,300,,$$$864,000]]$

Here are the company's standard cost cards for each product cost.

$\backslash$table$[[$Input$,$Quantity Standards,Price Standards,$\backslash$table$[[$Standard Cosi$],[$per Unit$]]],[$DM$,3\mathrm{.}0$ yards,$$18\mathrm{.}00$ peryard,$$54\mathrm{.}00],[$DL$,1\mathrm{.}6$ hours,$$9\mathrm{.}00$ per hour,$$14\mathrm{.}40],[$Variable$-$MOH,$1\mathrm{.}6$ hours,$$7\mathrm{.}00$ perhour,$$11\mathrm{.}20],[$Fixed$-$MOH,$1\mathrm{.}6$ hours,$$14\mathrm{.}00$ perhour,$$22\mathrm{.}40]]$

$q,$

$($a$)$

Prepare a flexible budget for Waterway Company so management can evaluate the company's actual performance using a more appropriate benchmark.

Units sold

Revenues

Variable costs

DM

DL

Contribuble$-$MOH

Fixed$-$MOH margin

Operating income

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