Prepare and interpret a performance report (Learning Objective 2)

Refer to the Lasting Bubbles data in P11-40A. The company sold 60,000 bubble kits during August 2007, and its actual operating income was as follows:

Requirements 1. Prepare an income statement performance report for August 2007 in a format similar to Exhibit 11-7.
2. What accounts for most of the difference between actual operating income and static budget operating income?
3. What is Lasting Bubbles’ static budget variance? Explain why the income statement performance report provides Lasting Bubbles’ managers with more useful information than the simple static budget variance. What insights can Lasting Bubbles’ managers draw from this performance report?

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Sales revenue. Variable expenses: LASTING BUBBLES, INC. Income Statement Month Ended August 31, 2007 Cost of goods sold. Sales commissions............. Utilities expense.... Fixed expenses: Salary expense. Depreciation expense. Rent expense Utilities expense. Total expenses. Operating income.. $185,000 $ 69,500 18,000 6,600 34,000 20,000 10,000 5,200 163,300 $ 21,700