P10-43A

Problems Group A P10-43A Prepare a budget with different volumes for planning (Learning Objective 5) Outrageous Bubbles, Inc., produces multicolored bubble solution used for weddings and other events. The company's master budget income statement for March follows. It is based on expected sales volume of 55,000 bubble kits. OUTRAGEOUS BUBBLES, INC. Master Budget Income Statement Month Ended March 31 Sales revenu.. Variable expenses: $170,500 Cost of goods sold. Sales commissions Utility expense. 68,750 13.750 5,500 Fixed expenses: Salary expensc Depreciation expense Rent expense. Utility expense.. 30,000 20,000 15,000 7.000 $160,000 S 10,500 Total expenses. Operating income. Outrageous Bubbles plant capacity is 62,500 kits. If actual volume exceeds 62,500 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 2. Graph the behavior of the company's total costs. Use total costs on the y 3. Why might Outrageous Bubbles' managers want to see the graph you output levels of 55,000, 60,000, and 65,000 kits. axis and volume (in thousands of bubble kits) on the a-axis. prepared in Requirement 2 as well as the columnar format analysis in Requirement 1? What is the disadvantage of the graphic approach