Small Talk Technologies manufactures capacitors for cellular base stations and other communications applications. The companys July 2016 flexible budget shows output levels of 7,500, 9,000, and 11,000 units. The static budget was based on expected sales of 9,000 units.Variable Expenses Budget Amount per Unit Sales Revenue Contribution Margin Fixed Expenses Operating Income 11,000$ 57,00053,000$ 24$ 264,00014154,000 SMALL TALK TECHNOLOGIES Flexible Budget For the Month Ended July 31, 2016110,0009,0007,500 Units$ 37,00053,000$ 216,000126,00090,000$ 22,00053,000$ 180,000105,00075,000

The company sold 11,000 units during July, and its actual operating income was as follows:Variable Expenses Sales Revenue Contribution Margin Fixed Expenses 111,80054,000$ 57,800159,200$ 271,000 Operating Income SMALL TALK TECHNOLOGIES Income Statement For the Month Ended July 31, 2016 Requirements 1. Prepare a flexible budget performance report for July.2. What was the effect on Small Talks operating income of selling 2,000 units more than the static budget level of sales?3. What is Small Talks static budget variance for operating income?4. Explain why the flexible budget performance report provides more useful information to Small Talks managers than the simple static budget variance. What insights can Small Talks managers draw from this performance report?