Prepare an income statement performance report (Learning Objective 2)
Kool-Times installed nine pools during May. Prepare an income statement perfor¬ mance report for Kool-Time for May, using Exhibit 11-7 as a guide. Assume that the actual sales price per pool is $12,000, actual variable expenses total $61,000, and actual fixed expenses are $19,000 in May. The master budget was prepared with the following assumptions: variable cost of $8,000 per pool; fixed expenses of $20,000 per month; anticipated sales volume of eight pools at $12,000 per pool.
Compute the sales volume variance and flexible budget variance. Use these variances to explain to Kool-Time’s management why May’s operating income dif¬ fers from operating income shown in the static budget.