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?