During July, Neptune Company had actual sales of $144,000 with a volume of 64,000 units compared to budgeted sales of $156,000 of 65,000 units. Actual variable cost of goods sold was $108,800, compared to a budget of $109,200. Monthly fixed expenses, budgeted at $22,400, totaled $20,000. Interest revenue of $2,000 was earned during July, but had not been included in the budget.

Prepare a performance report for July and explain Neptune's operating income variance.