Problem
The text refers to an "Income from Operations" variance on pages 928 & 929. Since the case study refers to "Net Income" at the bottom of the flexible budget, and "net income" on the case study, and "income from operations" in the text are computed the same way, please assume the variances illustrate the same thing. Suppose that once you compute the flexible budget and fully present it, it shows actual net income of $1,825,000 and flexibly budgeted net income of $124,912,500. Please compute the "Net Income Variance" from this data, indicate whether it is favorable or unfavorable, and show your work. Write a sentence or more advising the management of Eastern Shore Milky Way company about what this data means, and what action(s) it should take as a result.