Refer to the Popping Bubbles’ data in P10-56B. The company sold 70,000 bubble kits during March and its actual operating income was as follows:

Requirements:

1. Prepare an income statement performance report for October.
2. What accounts for most of the difference between actual operating income and comprehensive budget operating income?
3. What is Popping Bubbles’ comprehensive budget variance for operating income?
Explain why the income statement performance report provides Popping Bubbles’
managers with more useful information than the simple comprehensive budget variance. What insights can Popping Bubbles’ managers draw from this performance report?

Data From P10-56B:-

Popping Bubbles produces multicolored bubble solution used for weddings and other events.

Popping Bubbles’ plant capacity is 72,500 kits. If actual volume exceeds 72,500 kits, the company must expand the plant. In that case, salaries will increase by 10%, depreciation by 15%, and rent by \($7,000\). Fixed utilities will be unchanged by any volume increase.

The company’s comprehensive budget income statement for October follows. It is based on expected sales volume of 65,000 bubble kits.

Transcribed Image Text:

POPPING BUBBLES, INC. Income Statement Month Ended October 31 Sales revenue. Variable expenses: Cost of goods sold Sales commissions. Utility expense Fixed expenses: Salary expense.. Depreciation expense. Rent expense............ Utility expense Total expenses. Operating income.. $211,000 $ 84,500 15,500 14,000 35,100 18,000 10,550 5,000 $182,650 $ 28,350