AllTalk Technologies manufactures capacitors for cellular base stations and other communications applications. The company's July 2018 flexible budget shows output levels of 7,500, 9,000, and 11,000 units. The static budget was based on expected sales of 9,000 units. The company sold 11,000

units during July. Its flexible budget and actual operating income was as follows:

	Budget per Unit Amount
Unit	25	7,500	9,000	11,000
Sales Revenue	11	187,500	225,000	275,000
Variable Expenses		82,500	99,000	121,000
Contribution Margin		105,000	126,000	154,000
Fixed Expense		52,000	52,000	52,000
Operating Income		53,000	74,000	102,000

AllTalk Income Statement Month Ended July 31, 2018
Sales Revenue	282,000
Variable Expenses	126,100
Contribution Margin	155,900
Fixed Expense	53,500
Operating Income	102,400

1.	Prepare a flexible budget performance report for July.
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 for operating income?
4.	Explain why the flexible budget 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?