P9.5 The manager of Buff’s Buffet is preparing next year’s budget. She wants to prepare a flexible budget for three different annual revenue levels using a contribution margin income statement. Three levels of sales revenue are to be used: $800,000, $900,000, $1,000,000. The following information is available to help in preparing the flexible budget.

Food cost averages 40% of sales revenue.

Variable labor costs average 25% of sales revenue.

Fixed labor cost is $60,000 annually, and other fixed costs are

$120,000.

Other variable costs average 12% of sales revenue.

Income tax rate is estimated to be 30% on operating income (before tax)