AllTalk Technologies manufactures capacitors for cellular base stations and other communications applications. The companys July 2014 flexible

AllTalk Technologies manufactures capacitors for cellular base stations and other communications applications. The company’s July 2014 flexible budget shows output levels of 6,500, 8,000, and 10,000 units. The static budget was based on expected sales of 8,000 units.

The company sold 10,000 units during July, and its actual operating income was as follows:

Requirements
1. Prepare a flexible budget performance report for July.
2. What was the effect on AllTalk’s operating income of selling 2,000 units more than the static budget level of sales?
3. What is AllTalk’s static budget variance?
4. Explain why the flexible budget performance report provides more useful ­information to AllTalk’s managers than the simple static budget variance. What insights can AllTalk’s managers draw from this performancereport?

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ALLTALK TECHNOLOGIES Flexible Budget For the Month Ended July 31, 2014 Budget Amount Per Unit By Units Sales Revenue Variable Expenses Contribution Margin Fixed Expenses 6500 8,000 10000 24 156,000 $ 192,000 $ 240,000 10 65,000 80,000 100,000 91,000 112,000 140,000 53,000 53,000 53,000 38,000 59,000 $ 87,000 Operating Income3 ALLTALK TECHNOLOGIES Income Statement For the Month Ended July 31, 2014 Sales Revenue Variable Expenses Contribution Margin Fixed Expenses Operating Income 245,000 104,500 141,500 54,000 87,500