Refer to the Everlasting Bottles Data in P10-56B. The company sold 60,000 bubble kits during January and its actual operating income was as follows:
EVERLASTING BUBBLES, INC.
Master Budget Income Statement
Month Ended January 31
Sales revenue ................................................................ $191,000
Variable expenses:
Cost of goods sold ........................................................ $ 75,500
Sales commissions ........................................................... 18,000
Utility expense ................................................................... 6,000
Fixed expenses:
Salary expense............................................................... 32,200
Depreciation expense ...................................................... 20,000
Rent expense.................................................................... 14,000
Utility expense .................................................................. 7,000
Total expenses.............................................................. $172,700
Operating income......................................................... $ 18,300
Requirements
1. Prepare an income statement performance report for January.
2. What accounts for most of the difference between actual operating income and master budget operating income?
3. What is Everlasting Bubbles' master budget variance? Explain why the income statement performance report provides Everlasting Bubbles' managers with more useful information than the simple master budget variance. What insights can Everlasting Bubbles' managers draw from this performance report?