PROBLEMS wedding and P10-43A Prepare a budget with different volumes for planning (Learning other events. The company's master budget income statement for March tolla Outrageous Bubbles, Inc., produces multicolored bubble solution used for Objective 5) based on expected sales volume of 55,000 bubble kits. OUTRAGEOUS BUBBLES, INC. Master Budget Income Statement Month Ended March 31 $170,500 Sales Variable expenses Cost of goods sold Sales commissions Utility experte $ 68,750 13,750 5.500 Fixed expenses Salary expense Depreciation expense Rent expics Utility expense Total expenses Operating income 30,000 20,000 15.000 7,000 $160,000 $ 10,500 Outrageous Bubbles' plant capacity is 62,500 kits. If actual volume exceeds 62,500 kls, the company must expand the plant. In that case, salaries will increase by 10%, depres tion by 15%, and rent by $4,000, Fixed utilities will be unchanged by any volume increase Requirements 55,000, 60,000, and 65.000 kits. ume (in thousands of bubble kits) on the x-axis. 1. Prepare flexible budget income statements for the company, showing output leves 2 Graph the behavior of the company's total costs. Use total costs on the years and so 3. Why might Outrageous Bubbles managers want to see the graph you preparedit Requirement as well as the columnar format analysis in Requirement 17 What is the disadvantage of the graphic approach? Performance Evaluation P10-44A Prepare and interpret a performance report (Learning Objective 2) Refer to the Outrageous Bubbles data in P10-43A. The company sold 60,000 bubble kits during March, and its actual operating income was as follows: OUTRAGEOUS BUBBLES, INC. Income Statement Month Ended March 31 $ 194,000 $ 75,500 16,500 6,000 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... 32,200 20.000 14,550 7.000 5171,750 $ 22,250 Requirements 1. Prepare an income statement performance report for March 2 What accounts for most of the difference between actual operating income and mas- ter budget operating income? 3. What is Outrageous Bubbles' master budget variance for operating income? Explain why the income statement performance report provides Outrageous Bubbles' man- agers with more useful information than the simple master budget variance. What insights can Outrageous Bubbles' managers draw from this performance report