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Howard Cooper, the president of Thornton Computer Services, needs your help. He wonders about the potential effects on the firm$$s net income if he changes the service rate that the firm charges its customers. The following basic data pertain to fiscal Year $3.$

Standard rate and variable costs

Service rate per hour $ $82\mathrm{.}00$

Labor cost $32\mathrm{.}00$

Overhead cost $6\mathrm{.}80$

Selling, general, and administrative cost $3\mathrm{.}50$

Expected fixed costs

Facility maintenance $ $521,000$

Selling, general, and administrative $149,000$

Required:

Prepare the pro forma income statement that would appear in the master budget if the firm expects to provide $44,000$ hours of services in Year $3.$

A marketing consultant suggests to Mr$.$ Cooper that the service rate may affect the number of service hours that the firm can achieve. According to the consultant$$s analysis, if Thornton charges customers $$77$ per hour, the firm can achieve $53,000$ hours of services. Prepare a flexible budget using the consultant$$s assumption.

The same consultant also suggests that if the firm raises its rate to $$87$ per hour, the number of service hours will decline to $37,000.$ Prepare a flexible budget using the new assumption.