Creative Bubbles, Inc. produces multicolored bubble solution used for weddings and other events. The company sold 60,000 bubble kits during December, and its actual operating income was as follows: 6 (Click the icon to view the actual income statement.) The company's flexible budget income statement for December follows: (Click the icon to view the flexible budget income statement.) Read the requirements. Requirement 1. Prepare the income statement performance report. Note: The master budget was based on expected sales volume of 55,000 bubble kits. (For accounts with a 0 balance, make sure to enter "0" in the appropriate column. Label each variance as favorable (F) or unfavorable (U). A variance of zero is considered favorable.) Creative Bubbles, Inc. Income Statement Performance Report For the month ended December 31 Actual Flexible Volume Master Flexible Budget Variance Budget Variance Budget 60000 194500 Output units Sales revenue Variable expenses: Cost of goods sold Salee rammiccinne 194500 Sales revenue Variable expenses: Cost of goods sold Sales commissions expense Utility expense Fixed expenses: Salary expense Depreciation expense Rent expense Utility expense Total expenses 11 Operating income 1 Data Table Creative Bubbles, Inc. Income Statement Month Ended December 31 Sales revenue $ 194,500 Variable expenses: Cost of goods sold 75,700 Sales commissions 18,100 Utility expense 6,000 Fixed expenses: Salary expense 32,200 Depreciation expense 20,000 Rent expense 14,350 7,000 Utility expense $ Total expenses. 173,350 $ 21,150 Operating income - X Data Table Creative Bubbles, Inc. Flexible Budget Income Statement Month Ended December 31 Flexible Budget per Output Unit Output Units (Kits) 55,000 60,000 65,000 Sales revenue $ 3.10 $ 170,500 $ 186,000 $ 201,500 Variable expenses: Cost of goods sold 1.25 68,750 75,000 81,250 Sales commissions 0.25 13,750 15,000 16,250 Utility expense 0.10 5,500 6,000 6,500 Fixed expenses: Salary expense 30,000 30,000 33,000 Depreciation expense 20,000 20,000 23,000 Rent expense 15,000 15,000 19,000 Utility expense 7,000 7,000 7,000 Total expenses $ 160,000 $ 168,000 $ 186,000 Operating income $ 10,500 $ 18,000 $ 15,500 Print Done i X Requirements 1. Prepare an income statement performance report for December. Note: The master budget was based on expected sales volume of 55,000 bubble kits. 2. What accounts for most of the difference between actual operating income and master budget operating income? 3. What is Creative Bubbles' master budget variance for operating income? Explain why the income statement performance report provides Creative Bubbles' managers with more useful information than the simple master budget variance. What insights can Creative Bubbles' managers draw from this performance report? IL | T Print Done