The management of Magnificent Modems, Inc. (MMI), is uncertain as to the volume of sales that will exist in 2011. The president of the company asked the chief accountant to prepare flexible budget income statements assuming that sales activity amounts to 3,000 and 6,000 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 6,000 units.
c. Indicate whether each variance is favorable orunfavorable.

Transcribed Image Text:

Flexible Budget Income Statements Static Budgot Flexible Flexible Budget Budget Number of units 3,000 5,000 6,000 Cost per Unit Sales revenue $120.00 S600,000 Variable manuf. costs Materials 40.00 200,000 125,000 Labor 25.00 Overhead 4.00 20,000 30,000 Variable SG&A 6.00 Contribution margin Fixed costs 225,000 Manufacturing rent Dep. on manu, equip. SG&A expenses Dep. on admin. equip. Net income (loss) 50,000 60,000 71,950 12,000 $ 31,050 S158,950) S76,050