McKinley City Tours offers small group guided walks. The following information for July provides the original budget:

McKinley actually sold 1,440 tours in July. The price variance was $2,880 unfavorable, the variable cost variance was $5,760 unfavorable, and the fixed cost variance was $1,500 unfavorable. 

Required

a. Prepare the operating income statement for the actual July results for McKinley.

b. The following table provides the previous 24 months of price variances for McKinley City Tours.

The controller at McKinley tells you that the financial analysis team believes that these variances come from a process with a zero mean and a standard deviation of $950. Prepare a short memo with your recommendation on whether the July price variance should be investigated. Include any visual support for your recommendation.

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Number of tours Revenue.... Variable costs.... Contribution margin.... Fixed costs.... Operating profit.. Master Budget 1,200 $114,000 57,600 $ 56,400 30,000 $ 26,400