It is now July 31st. The President provides you with the income statement prepared

by the accounting department with the actual results below for the quarter ending

June 30th.

1. Prepare Comprehensive Performance Report. (Hint: You will need to prepare

flexible budget to complete this report).

2. Was the increase in net income mostly attributed to activity or cost control?

Explain.

Hawaiian Leis Limited

Income Statement (218,000 units)

For the Quarter Ending June 30

Sales $ 2,180,000

Variable Expenses:

Cost of Goods Sold $ 872,000

Commissions 87,200 959,200

Contribution Margin 1,220,800

Fixed Expenses:

Advertising 540,000

Rent 54,000

Wages and salaries 330,000

Utilities 21,000

Insurance 9,000

Depreciation 42,000 996,000

Operating Income 224,800

Less: Interest Expense 5,387

Net Income $ 219,413