Creative Bubbles, Inc. produces multicolored bubble solution used for weddings and other events. The company sold 60,000 bubble kits during December, and its actual operating income was asfollows:

Requirement 1. Prepare the income statement performance report. Note: The master budget was based on expected sales volume of 55,000 bubble kits. (For accounts with a 0 balance, make sure to enter "0" in the appropriate column. Label each variance as favorable (F) or unfavorable (U). A variance of zero is considered favorable.)

Requirement 3. What is Bubbles' master budget variance? Explain why the income statement performance report providesBubbles' managers with more useful information than the simple master budget variance. What insights can Bubbles' managers draw from this performance report?

Creative Bubbles' master budget variance is $______			, meaning that its operating income is________
than expected.

Transcribed Image Text:

Creative Bubbles, Inc. Income Statement Month Ended December 31 $ Sales revenue Variable expenses: Cost of goods sold Sales commissions Utility expense Fixed expenses: Salary expense Depreciation expense Rent expense Utility expense Total expenses Operating income $ 188,250 75,750 17,750 6,000 32,200 20,000 5,750 7,000 $ 164,450 $ 23,800 Sales revenue Variable expenses: Cost of goods sold Sales commissions Utility expense Fixed expenses: Salary expense Depreciation expense Rent expense Utility expense Flexible Budget Income Statement Month Ended December 31 Flexible Budget per Output Unit Total expenses Operating income $ 3.00 1.25 0.25 0.10 Output Units (Kits) 60,000 55,000 $ 165,000 $ 68,750 13,750 5,500 30,000 20,000 6,000 7,000 $ 151,000 $ $ 14,000 $ 65,000 180,000 $ 195,000 75,000 15,000 6,000 30,000 20,000 6,000 7,000 81,250 16,250 6,500 33,000 23,000 10,000 7,000 159,000 $177,000 21,000 $ 18,000 Output units Sales revenue Variable expenses: Cost of goods sold Sales commissions expense Utility expense Fixed expenses: Salary expense Depreciation expense Rent expense Utility expense Total expenses Operating income Actual For the month ended December 31 Flexible Budget Variance Flexible Budget Volume Variance Master Budget Creative Bubbles, Inc. Income Statement Month Ended December 31 $ Sales revenue Variable expenses: Cost of goods sold Sales commissions Utility expense Fixed expenses: Salary expense Depreciation expense Rent expense Utility expense Total expenses Operating income $ 188,250 75,750 17,750 6,000 32,200 20,000 5,750 7,000 $ 164,450 $ 23,800 Sales revenue Variable expenses: Cost of goods sold Sales commissions Utility expense Fixed expenses: Salary expense Depreciation expense Rent expense Utility expense Flexible Budget Income Statement Month Ended December 31 Flexible Budget per Output Unit Total expenses Operating income $ 3.00 1.25 0.25 0.10 Output Units (Kits) 60,000 55,000 $ 165,000 $ 68,750 13,750 5,500 30,000 20,000 6,000 7,000 $ 151,000 $ $ 14,000 $ 65,000 180,000 $ 195,000 75,000 15,000 6,000 30,000 20,000 6,000 7,000 81,250 16,250 6,500 33,000 23,000 10,000 7,000 159,000 $177,000 21,000 $ 18,000 Output units Sales revenue Variable expenses: Cost of goods sold Sales commissions expense Utility expense Fixed expenses: Salary expense Depreciation expense Rent expense Utility expense Total expenses Operating income Actual For the month ended December 31 Flexible Budget Variance Flexible Budget Volume Variance Master Budget

Answer rating: 100% (QA)

Creative Bubbles Inc Income Statement Performance Report For the Month Ended Decemb... View the full answer