AllTalk Technologies manufactures capacitors for cellular base stations and other communications applications. The company's January 2012 flexible budget income statement shows output levels of 6,500, 8,000, and 10,000 units. The static budget was based on expected sales of 8,000 units.

	ALLTALK TECHNOLOGIES Flexible Budget Income Statement Month Ended January 31, 2012
		Per Unit	By Units (Capacitors)
			6,500	8,000	10,000
	Sales revenue	$24	$156,000	$192,000	$240,000
	Variable expenses	$10	65,000	80,000	100,000
	Contribution margin		$91,000	$112,000	$140,000
	Fixed expenses		53,000	53,000	53,000
	Operating income		$38,000	$59,000	$87,000
	The company sold 10,000 units during January, and its actual operating income was as follows:
	ALLTALK TECHNOLOGIES Income Statement Month Ended January 31, 2012
	Sales revenue	$246,000
	Variable expenses	104,500
	Contribution margin	$141,500
	Fixed expenses	54,000
	Operating income	$87,500
	Requirements:
	1. Prepare an income statement performance report for January.
	2. What was the effect on AllTalk's operating income of selling 2,000 units more than the static budget level of sales?
	3. What is AllTalk's static budget variance? Explain why the income statement performance report provides more useful information to AllTalk's managers than the simple static budget variance. What insights can AllTalk's managers draw from this performance report?
1		A Technologies
		Flexible Budget Performance Report
		For the month end January 31, 2012
		Flexible Budget		Actual	Variance
	Sales	240000	246000	6000	F
	Less: Variable Cost	100000	104000	4500	U
	Contribyution Margin	140000	141500	1500	F
	Less:Fixed Costs	5300	54000	1000	U
	Operating Income	87000	87500	500	F