70.2K

Verified Solution

Link Copied!

Blowing 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: B (Click the icon to view the actual income statement.) The company's flexible budget income statement for July follows: B (Click the icon to view the flexible budget income statement.) Read the requirements. Blowing Bubbles, Inc. Income Statement Month Ended July 31 $ 221,500 Sales revenue .. Variable expenses: Cost of goods sold Sales commissions $ 87,600 13,500 14,000 Utility expense Fixed expenses: Salary expense Depreciation expense 32,300 20,000 Rent expense 8,950 5,000 Utility expense $ Total expenses. . 181,350 $ 40,150 Operating income Blowing Bubbles, Inc. Flexible Budget Income Statement Month Ended July 31 Flexible Budget per Output Unit Output Units (Kits) 65,000 70,000 75,000 Sales revenue $ 3.05 $ 198,250 $ 213,500 $ 228,750 Variable expenses: 1.25 81,250 93,750 Cost of goods sold Sales commissions 87,500 10,500 0.15 9,750 11,250 15,000 0.20 13,000 14,000 Utility expense Fixed expenses: Salary expense Depreciation expense 30,000 30,000 33,000 20,000 20,000 23,000 Rent expense 10,000 5,000 10,000 5,000 16,000 5,000 Utility expense Total expenses $ 169,000 $ 177,000 $ 197,000 $ 29,250 $ 36,500 $ 31,750 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 Blowing Bubbles' master budget variance? Explain why the income statement performance report provides Blowing Bubbles' managers with more useful information than the simple master budget variance. What insights can Blowing Bubbles' managers draw from this performance report? Requirement 2. What accounts for most of the difference between actual operating income and master budget operating income? The for operating income is larger than the . Most of the difference between master budget operating income and actual operating income resulted from bubble kits than expected. Requirement 3. What is Blowing Bubbles' master budget variance? Explain why the income statement performance report provides Blowing Bubbles' managers with more useful information than the simple master budget variance. What insights can Blowing Bubbles' managers draw from this performance report? meaning that its operating income is Blowing Bubbles' master budget variance is $ than expected. Choose two reasons why the income statement performance report provides Blowing Bubbles' managers with more information than the simple master budget variance. These variances suggest that the marketing department did a job by selling kits than expected, at a sale price than expected

Answer & Explanation Solved by verified expert

See Answer