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Month Ended July 31 Flexible Budget per Output Unit Output Units (Kits) 65,000 70,000 75,000 $ 200 188,500 5 203.000 $ 217,500 Jappropriate 211,100 88,200

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Month Ended July 31 Flexible Budget per Output Unit Output Units (Kits) 65,000 70,000 75,000 $ 200 188,500 5 203.000 $ 217,500 Jappropriate 211,100 88,200 24,000 3,500 1.25 81,250 19,500 3,250 0.30 87,500 21,000 3,500 Outrageous Bubbles, Inc. Income Statement Month Ended July 31 $ Sales revenue Variable expenses Cost of goods sold Sales commissions Utility expense Fixed expenses Salary expense Depreciation expense Rent expense Utility expense $ Total expenses s Operating income 93.750 22,500 3.750 0.05 35,100 Sales revenue Variable expenses Cost of goods sold Sales commissions Utility expense Fixed expenses Salary expense Depreciation expense Rent expense Utility expense Total expenses 18.000 33.000 36.300 14.250 5.000 33,000 18.000 15.000 5,000 18,000 15,000 5,000 20,700 19,000 188,050 23,050 5.000 $ 175,000 $ 183,000 $ 201,000 $ 13,500 $ 20,000 $ 16,500 Operating income For the month ended July 31 Actual Master Flexible Budget Variance Flexible Budget Volume Variance Budget Output units F Sales revenue F F Variable expenses Cost of goods sold Sales commissions expense U U Utility expense Fixed expenses Salary expense Depreciation expense Rent expense U F Utility expense Total expenses U U TIC Operating income F F Requirement 2. What accounts for most of the difference between actual operating income and master budget operating income? Month Ended July 31 Flexible Budget per Output Unit Output Units (Kits) 65,000 70,000 75,000 $ 200 188,500 5 203.000 $ 217,500 Jappropriate 211,100 88,200 24,000 3,500 1.25 81,250 19,500 3,250 0.30 87,500 21,000 3,500 Outrageous Bubbles, Inc. Income Statement Month Ended July 31 $ Sales revenue Variable expenses Cost of goods sold Sales commissions Utility expense Fixed expenses Salary expense Depreciation expense Rent expense Utility expense $ Total expenses s Operating income 93.750 22,500 3.750 0.05 35,100 Sales revenue Variable expenses Cost of goods sold Sales commissions Utility expense Fixed expenses Salary expense Depreciation expense Rent expense Utility expense Total expenses 18.000 33.000 36.300 14.250 5.000 33,000 18.000 15.000 5,000 18,000 15,000 5,000 20,700 19,000 188,050 23,050 5.000 $ 175,000 $ 183,000 $ 201,000 $ 13,500 $ 20,000 $ 16,500 Operating income For the month ended July 31 Actual Master Flexible Budget Variance Flexible Budget Volume Variance Budget Output units F Sales revenue F F Variable expenses Cost of goods sold Sales commissions expense U U Utility expense Fixed expenses Salary expense Depreciation expense Rent expense U F Utility expense Total expenses U U TIC Operating income F F Requirement 2. What accounts for most of the difference between actual operating income and master budget operating income

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