OPTIONS FOR FILL IN THE BLANKS:

1. The _____ for operating income is larger than the _____

OPTIONS :(favorable flexible budget variance, favorable volume variance, unfavorable flexible budget variance, un-favorable volume variance.)

2. Most of the difference between master budger operating income and actual operating incomes resulted from ______

OPTIONS: Selling 5,000 or less, Selling 5,000 or more, selling 70,000 or less, selling 70,000 or more.

3. These variances suggest that the marketing department did a ___ job by selling ___ kits than expected, at a ___ sale price than expected.

OPTIONS

FIRST BLANK: good/poor

SECOND BLANK: fewer/more

THIRD BLANK: higher/lower

Data Table Creative Bubbles, Inc. Flexible Budget Income Statement Month Ended December 31 Flexible Budget per Output Unit Output Units (Kits) 65,00070,000 S 191,750 S 206,500 S 221,250 75,000 S 2.9 Sales revenue Variable expenses 1.20 0.25 0.15 78,000 16,250 9,750 Cost of goods sold Sales commissions Utility expense 84,000 17,500 10,500 90,000 18,750 11,250 Fixed expenses: Salary expense Depreciation expense Rent expense Utility expense 33,000 36,300 18,000 20,700 9,000 13,000 6,000 S 170,000 S 178,000 S 196,000 S 21,750 S 28,500 S 25,250 33,000 18,000 9,000 6,000 6,000 Total expenses Operating income PrintDone Data Table Creative Bubbles, Indc. Income Statement Month Ended December 31 S 211,500 Sales revenue Variable expenses Cost of goods sold Sales commissions Utility expense $84,400 19,000 10,500 Fixed expenses: Salary expense Depreciation expense Rent expense Utility expense 35,100 18,000 8,650 6,000 $ 181,650 29,850 Total expenses Operating income PrintDone Creative Bubbles, Inc. produces multicolored bubble solution used for weddings and other events. The company sold 70,000 bubble kits during December, and its actual operating income was as follows EB (Click the icon to view the actual income statement.) The company's flexible budget income statement for December follows: EEB (Click the icon to view the flexible budget income statement.) Read the reguirements Requirement 1, Prepare the income statement performance report. Note. The master budget was based on expected sales volume of 65.000 bubble kits. (For accounts with a 0 balance. make sure to enter "O 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 Budget Variance Flexible Volume Master Budget Budget Variance Output units 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 Operating income Requirement 2. What accounts for most of the difference between actual operating income and master budget operating income? The ncome resulted from Requirement 3. What is Creative Bubbles' master budget variance? Explain why the income statement performance report provides Creative Bubbles' managers with more useful information than the simple for operating income is larger than the bubble kits than expected. V.Most of the difference between master budget operating income and actual operating master budget variance. What insights can Creative Bubbles' managers draw from this performance report? Creative Bubbles master budget variance is $ than expected Choose two reasons why the income statement performance report provides Creative Bubbles managers with more information than the simple master budget variance. meaning that its operating income is These variances suggest that the marketing department did a | | job by selling | | kits tan expected, at a | | sale price than expected