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The management of Stuart Modems, Inc. (SMI) is uncertain as to the volume of sales that will exist in Year 1. The president of the company asked the chief accountant to prepare flexible budget income statements assuming that sales activity amounts to 9,000 and 13,000 units. The static budget is shown in the following form, 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 13,000 units. c. Indicate whether each variance is favorable (F) or unfavorable (U). (Select "None" if there is no effect (i.e., zero variance).) STUART MODEMS, INC Flexible Budget Income Statements Cost per Static unit Budget Flexible Budgets 11,000 9,000 13,000 $ 140 $ 1,540,000 $ 9,000 Volume Variance Number of units 55 40 8 605,000 440,000 88,000 110.000 297.000 10 Sales revenue Variable manufacturing costs Materials Labor Overhead Variable selling general & administrative Contribution margin Fixed costs Manufacturing rent Depreciation on manufacturing equipment Seling, general & administrative expenses Depreciation on administrative equipment Net Income (los) 65,000 75,000 95.200 27,000 34,800 $ (19,200) 5 $ 88.800

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