Rauch Educational Services had budgeted its training service charge at \($80\) per hour. The company planned to provide 40,000 hours of training services during 2007. By reducing the service charge to \($70\) per hour, the company was able to increase the actual number of hours to 42,000.

Required

a. Determine the sales volume variance, and indicate whether it is favorable (F) or unfavorable (U).

b. Determine the flexible budget variance, and indicate whether it is favorable (F) or unfavorable (U).

c. Did reducing the price of training services increase profitability? Explain.