Precious Bubbles, Inc. produce multicolored bubble solution used for weddings and other events. The company sold 60,000 bubble kits during May, and its actual operating income was as follows:

Data table Precious Bubbles, Inc. Income Statement Month Ended May 31 **** Sales revenue Variable expenses: Cost of goods sold Sales commissions Utility expense Salary expense Depreciation expense Rent expense Utility expense Fixed expenses: Total expenses Operating income Print ..... ... .. $ $ $ Done 179,000 75,750 14,250 9,000 32,200 20,000 9,950 6,000 167,150 11,850 ata table Sales revenue Variable expenses: Cost of goods sold Sales commissions Utility expense Fixed expenses: Salary expense Depreciation expense Rent expense Utility expense Total expenses Operating income Month Ended May 31 Flexible Budget per Output Unit $ 2.90 1.25 0.20 0.15 Print Output Units (Kits) 55,000 60,000 65,000 $ 159,500 $ 174,000 $ 188,500 68,750 75,000 81,250 11,000 12,000 13,000 8,250 9,000 9,750 30,000 30,000 20,000 20,000 11,000 11,000 6,000 6,000 $ 155,000 $ 163,000 $ $ 4,500 $ 11,000 $ Done 33,000 23,000 15,000 6,000 181,000 7,500 Requirement 1. Prepare the income statement performance report. Note: The master budget was based on expected sales volume of 55,000 bubble kits. (For accounts with a 0 balanc each variance as favorable (F) or unfavorable (U). A variance of zero is considered favorable.) Precious Bubbles, Inc. Income Statement Performance Report For the month ended May 31 Volume Master Flexible Budget Variance Variance Budget Output units Sales revenue Variable expenses Cost of goods sold Sales commissions expense Utility expense Fixed expenses Salary expense Depreciation expense Rent expense Actual Flexible Budget the thum Txpenses Sy exper Dega pr her expense LASly exper The Re Y M experi f untu persones perto ng po The methan mation than the Fixed expenses: Salary expense Depreciation expense Rent expense Utility expense Total expenses Operating income Requirement 2. What accounts for most of the difference between The for operating income is bubble kits than expected. us Bubbles' master budget variance f cious Bubbles' managers draw from t et variance for operating income is come statement performance report pro selling 5,000 less selling 5,000 more selling 60,000 less selling 60,000 more 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? Most of the difference between master budget operating The for operating income is larger than the bubble kits than expected. Requirement 3. What is Precious Bubbles' master budget variance for operating income? Explain why the income statement performance report provides Precious Bubbles man variance. What insights can Precious Bubbles managers draw from this performance report? This means that operating income is Precious Bubbles' master budget variance for operating income. than expected. Choose two reasons why the income statement performance r ecious Bubbles managers with more information than the simple master budget variance. good poor These variances suggest that the marketing department did a job by selling kits than expected, at a sale price than expected. 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? Most of the difference between The for operating income is larger than the Requ udget variance for operating income? Explain why the income statement performance report provides gers draw from this performance report? varia favorable flexible budget variance Prec ing income is This means that operating income is favorable volume variance unfavorable flexible budget variance Choc irmance report provides Precious Bubbles managers with more information than the simple master be unfavorable volume 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 Actual Flexible Budget Variance Flexible Budget Volume Variance Master Budget