Flowing Bubbles, Inc. produces multicolored bubble solution used for weddings and other events. The company sold 70,000 bubble kits during August, and its actual operating income was as follows: (Click the icon to view the actual income statement.) The company's flexible budget income statement for August follows: (Click the icon to view the flexible budget income statement.) Flowing Bubbles, Inc. Income Statement Month Ended August 31 Sales revenue.... Variable expenses: Cost of goods sold Sales commissions $ 213,000 84,700 20,250 10,500 Utility expense Fixed expenses: Salary expense 35,100 Depreciation expense 18,000 Rent expense 8,250 6,000 Utility expense $ 182,800 Total expenses. . . $ 30,200 Operating income Flowing Bubbles, Inc. Flexible Budget Income Statement Month Ended August 31 Flexible Budget per Output Unit 65,000 Output Units (Kits) 70,000 75,000 Sales revenue $ 2.95 $ 191,750 $ 206,500 $ 221,250 Variable expenses: Cost of goods sold 1.20 78,000 84,000 90,000 Sales commissions 0.25 16,250 17,500 18,750 Utility expense 0.15 9,750 10,500 11,250 Fixed expenses: Salary expense Depreciation expense 33,000 33,000 36,300 18,000 18,000 20,700 Rent expense Utility expense Total expenses 9,000 9,000 13,000 6,000 6,000 6,000 $ 170,000 $ 178,000 $196,000 $ 21,750 $ 28,500 $ 25,250 Operating income Requirement 1. Prepare the income statement performance report. Note: The master budget was based on expected sales volume of 65,000 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.) Flowing Bubbles, Inc. Income Statement Performance Report For the month ended August 31 Output units Sales revenue Variable expenses: Cost of goods sold Actual Flexible Budget Flexible Volume Master Variance Budget Variance Budget Sales commissions expense Utility expense Fixed expenses: Salary expense Depreciation expense Rent expense Utility expense Total expenses Operating income Requirement 2. What accounts for most of the difference between actual operating income and master budget operating income? The operating income resulted from for operating income is larger than the Most of the difference between master budget operating income and actual bubble kits than expected. Requirement 3. What is Flowing Bubbles' master budget variance for operating income? Explain why the income statement performance report provides Flowing Bubbles' managers with more useful information than the simple master budget variance. What insights can Flowing Bubbles' managers draw from this performance report? Flowing Bubbles' master budget variance for operating income is than expected. This means that operating income is Choose two reasons why the income statement performance report provides Flowing Bubbles' managers with more information than the simple master budget variance. A favorable sales revenue flexible budget variance means the sale price was higher. A favorable volume variance reveals whether profits increased due to less units being sold. A favorable volume variance reveals whether profits increased due to more units being sold. An unfavorable sales revenue flexible budget variance means the sale price was higher. These variances suggest that the marketing department did a sale price than expected. job by selling kits than expected, at a