Refer to the Creative Bubbles data in P10-71B. The company sold 70,000 bubble kits during December, and its actual operating income was as follows:

Sales revenue .........................................................................................$201,500

Variable expenses:

Cost of goods sold ....................................................................................81,250

Sales commissions ....................................................................................13,000

Utilities expense ........................................................................................9,750

Fixed costs:

Salary expense...........................................................................................33,000

Depreciation expense ................................................................................18,000

Rent expense................................................................................................9,000

Utilities expense .........................................................................................3,000

Total expenses.........................................................................................167,000

Operating income....................................................................................$34,500

Requirements

1. Prepare flexible budget income statements for the company, showing output levels of

65,000, 70,000, and 75,000 kits.

2. Graph the behaviour of the company's total costs.

3. Why might Creative Bubbles' managers want to see the graph you prepared in Requirement 2 as well as the columnar format analysis in Requirement 1? What is the disadvantage of the graphic approach?