Everlasting Bubbles, Inc., produces multicolored bubble solution used for weddings and other events. (Click the icon to view the master budget income statement.) Everlasting Bubbles' plant capacity is 72,500 kits. If actual volume exceeds 72,500 kits, the company must expand the plant. In that case, salaries will increase by 10%, depreciation by 15%, and rent by $4,000. Fixed utilities will be unchanged by any volume increase. 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 behavior of the company's total costs. Use total costs on the y-axis and volume (in thousands of bubble kits) on the x-axis. 3. Why might Everlasting 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? Requirement 1. Prepare flexible budget income statements for the company, showing output levels of 65,000, 70,000, and 75,000 kits. (Enter the per unit information to two decimal places.) Everlasting Bubbles, Inc. Flexible Budget Income Statement Month Ended May 31 Flexible Budget 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 per Output Unit 65,000 Output Units (Kits) 70,000 75,000 Data table The company's master budget income statement for May follows. It is based on expected sales volume of 65,000 bubble kits. Everlasting Bubbles, Inc. Master Budget Income Statement Month Ended May 31 188,500 Sales revenue Variable expenses: Cost of goods sold $ 81,250 Sales commissions 19,500 Utility expense 3,250 Fixed expenses: Salary expense 30,000 Depreciation expense 20,000 Rent expense 8,000 6,000 Utility expense 168,000 Total expenses 20,500 Operating income Print Done