P10-44A (similar to) Great Bubbles, Inc. produces multicolored bubble solution used for weddings and other events. The company sold 70,000 bubble kits during July, and its actual operating income was as follows: (Click the icon to view the actual income statement.) The company's flexible budget income statement for July follows: (Click the icon to view the flexible budget income statement.) Read the requirements. 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.) - X i Data Table Data Table - X Great Bubbles, Inc. Income Statement Performance Report For the month ended July 31 Great Bubbles, Inc. Actual Flexible Budget Volume Flexible Budget Master Budget Great Bubbles, Inc. Income Statement Month Ended July 31 Variance Variance Flexible Budget Income Statement Month Ended July 31 Output units $ 210,500 Flexible ......$ Sales revenue Variable expenses: Cost of goods sold Sales commissions expense Utility expense Sales revenue Variable expenses: Cost of goods sold Sales commissions Utility expense Fixed expenses: Salary expense Depreciation expense Rent expense Budget per Output Unit 88,300 24,000 3,500 Output Units (Kits) 65,000 70,000 75,000 $ 188,500 $ 203,000 $ 217,500 $ 2.90 Fixed expenses Salary expense Depreciation expense Rent expense 35,100 18,000 14,450 5,000 188,350 22,150 Sales revenue Variable expenses: Cost of goods sold Sales commissions Utility expense Fixed expenses: Salary expense Depreciation expense 1.25 0.30 0.05 81,250 19,500 3,250 87,500 21,000 3,500 93,750 22,500 3,750 Utility expense Utility expense Total expenses..... $ $ Total expenses Operating income ............. Operating income Rent expense Print Done 33,000 18,000 15,000 5,000 175,000 $ 13,500 $ 33,000 36,300 18,000 20,700 15,000 19,000 5,000 5,000 183,000 $ 201,000 20,000 $ 16,500 Requirements Utility expense Total expenses $ $ Operating income 1. Prepare an income statement performance report for July. Note: The master budget was based on expected sales volume of 65,000 bubble kits. 2. What accounts for most of the difference between actual operating income and master budget operating income? 3. What is Great Bubbles' master budget variance? Explain why the income statement performance report provides Great Bubbles managers with more useful information than the simple master budget variance. What insights can Great Bubbles' managers draw from this performance report? Print Done Clear All