Everlasting ?Bubbles, Inc. produces multicolored bubble solution used for weddings and other events. The company sold 70,000 bubble kits during January?, and its actual operating income was as? follows:

Income Statement Month Ended January 31

Sales Revenue	$225,100
Variable Expenses
Cost of Goods Sold	$88,250
Sales Commission	$15,500
Utility Expense	$10,500
Fixed Expenses:
Salary Expense	$35,100
Depreciation Expense	18,000
Rent Expense	8,350
Utility Expense	3,000

Flexible Budget per Output Unit

		65,000	70,000	75,000
Sales Revenue	$3,10	201,500	217,000	232,500
Variable Expense
Costs of Goods Sold	1.25	81,250	87,500	93,750
Sales Commission	0.20	13,000	14,000	15,000
Utility Expense	0.15	9,750	10,500	11,250
Fixed Expense
Salary Expense		33,000	33,000	36,300
Depreciation Expense		18,000	18,000	20,700
Rent Expense		9,000	9,000	15,000
Utility Expense		3,000	3,000	3,000
Total Expenses		167,000	175,000	195,000
Operating Income		34,500	42,000	37,500

1.

Prepare an income statement performance report for January. ?Note: The master budget was based on expected sales volume of 65,000 bubble kits.

Income Statement Performance Report

	Actual	Flexible Budget Variance	F or U	Flexible Budget	Volume Variance	F or U	Master Budget
Output Units
sales Revenue
Variable Expenses:
Costs of Goods Sold
Sales Commission Expense
Utility Expense
Fixed Expenses:
Salary Expense
Depreciation Expense
Rent Expense
Utility Expense
Total Expense
Operating Income

2.

What accounts for most of the difference between actual operating income and master budget operating? income?

3.

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