Question
Flowing Bubbles, Inc., produces multicolored bubble solution used for weddings and other events. Data: The company's master budget income statement for August follows. It is
Flowing Bubbles, Inc., produces multicolored bubble solution used for weddings and other events. Data: The company's master budget income statement for August follows. It is based on expected sales volume of 55,000 bubble kits. Flowing Bubbles, Inc. Income Statement Month ended August 31 Sales revenue $159,500 Variable expenses: COGS...68,750 Sales commissions...11,000 Utilities expense...8,250 Fixed expenses: Salary expense.30,000 Depreciation expense20,000 Rent expense.11,000 Utilities expense6,000 Total expenses...155,000 Operating income...45,00 Requirements 1. Prepare flexible budget income statements for the company, showing output levels of 55,000, 60,000, and 65,000 kits. 2. Graph the behavior of the companys total costs. Use total costs on the y-axis and volume (in thousands of bubble kits) on the x-axis. 3. Why might Flowing Bubbles manager want to see the graph you prepared in Requirement 2 as well as the columnar analysis in Requirement 1? What is the disadvantage of the graph approach?
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