Refer to the Great Bubbles data in P10-51A. The company sold 70,000 bubble kits during March, and its actual operating income was as follows:
GREAT BUBBLES, INC.
Master Budget Income Statement
Month Ended March 31
Sales revenue................................................................ $208,000
Variable expenses:
Cost of goods sold........................................................ $ 88,000
Sales commissions........................................................... 24,000
Utility expense................................................................... 3,500
Fixed expenses:
Salary expense................................................................. 32,300
Depreciation expense...................................................... 20,000
Rent expense..................................................................... 7,000
Utility expense.................................................................. 6,000
Total expenses............................................................. $180,800
Operating income......................................................... $ 27,200
Requirements
1. Prepare an income statement performance report for March in a format similar to Exhibit 10-12 .
2. What accounts for most of the difference between actual operating income and master budget operating income?
3. What is Great Bubbles' master budget variance? Explain why the income statement performance report provides Great Bubbles' managers with more useful information than the simple master budget variance. What insights can Great Bubbles' managers draw from this performance report?