Assume that the actual sales price per pool is $13,800, actual variable expenses total $63,000, and actual fixed expenses are $19,400 in July.

The master budget was prepared with the following assumptions: variable cost of $8,700 per pool, fixed expenses of $20,200 per month, and anticipated sales volume of nine pools at $13,800 per pool.

Requirement

1.	Compute the sales volume variance and flexible budget variance. Use these variances to explain to Kool-Time's management why July's operating income differs from operating income shown in the static budget.

Have Fun Pools Income Statement Performance Report Month Ended June 30 (2) (3) (4) (5) (1)-(3) Flexible (3)-(5) Actual Budget Results Flexible for Actual Sales Static at Actual Budget Number of Volume (Master) Prices Variance Output Units Variance Budget Output units (pools installed) 10 10 2F 8 Sales revenue $ 121.000 $1,000 F $ 120,000 $24,000 F $ 96,000 Variable expenses 83,000 3,000 U 80,000 16,000 U 64,000 Fixed expenses 22,000 2,000 U 20,000 -O 20,000 Total expenses 105.000 5.000 U 100,000 16,000 U 84,000 Operating income 16,000 $4,000 U $ 20,000 $ 8,000 F $12,000