Precious Bubbles, Inc. produces multicolored bubble solution used for weddings. The company sold 60,000 bubble kits during May, and its actual operating income was as follows:

Data table Precious Bubbles, Inc. Income Statement Month Ended May 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 Print ... .... ...... $ $ $ $ Done 179,000 75,750 14,250 9,000 32,200 20,000 9,950 6,000 167,150 11,850 Sales revenue Variable expenses: Flexible Budget Income Statement Month Ended May 31 Flexible Budget per Output Unit $ 2.90 1.25 0.20 0.15 Cost of goods sold Sales commissions Utility expense Fixed expenses: Salary expense Depreciation expense Rent expense Utility expense Total expenses Operating income Print Output Units (Kits) 60,000 65,000 174,000 $ 188,500 75,000 81,250 12,000 13,000 9,000 9,750 30,000 33,000 20,000 23,000 11,000 15,000 6,000 6,000 163,000 $ 181,000 11,000 $ 7,500 55,000 $ 159,500 $ 68,750 11,000 8,250 30,000 20,000 11,000 6,000 $ 155,000 $ 4,500 $ Done C 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 balance, make sure to enter in the appropriate nach variance as favorable (F) or unfavorable (U) A variance of zero is considered favorable) Precious Bubbles, Inc. Income Statement Performance Report For the month ended May 31 Volume Master Flexible Budget Variance Flexible Budget Variance Budget Output units Sales revenue Variable expenses Cost of goods sold u U Sales commissions expense Utility expense Fixed expenses Salary expense Depreciation expense Rand expense Actual 80.000 179,000 75.750 14,250 9.000 32,200 20.000 9,950 non U F F U U U Output units Sales revenue Variable expenses: Cost of goods sold Sales commissions expense Utlity expense Fixed expenses 60,000 179,000 75.750 14,250 9,000 32,200 20,000 9,950 6.000 Total expenses 167,150 U 11,850 Operating income Requirement 2. What accounts for most of the difference between actual operating income and master budget operating income? The for operating income is larger than the Most of the difference between master budget operating income and actual operat bubble kits than expected. Requirement 3. What is Precious Bubbles' master budget variance for operating income? Explain why the income statement performance report provides Precious Bubbles' managers with more useful info Salary expense Depreciation expense Rent expense Utility expense 10 590 60 SEE C F Prions Busines med tube sum ved for weddings and other events. The many sold 60.000 bubbleks during May, and is actual operating room was De The company's feable budget one for stay t w ftupom Read the me Uredbex ALLA Ally com 17 18 U HAS Opening Rement 2. alm for rithmanmat for singer than the but kepada Rument 2. What Frecute mer budget var for operating van What h Pre managers e bon t favorite bodgeva favorable volume venance Pacous Bubber mas budgets expected Choose to why the income statant parfomance P e ances suggest that the marketing depan da job by selling than expected t $40 4000 13008 Most of the bear bugelping mome and actual per comed mance report provides Pou Bubbi managers with more useful information than the sample master budge the simple bude v sale price than expected Total expenses Operating income 167,150 11,850 F Requirement 2. What accounts for most of the difference between actual operating income and master budget operating income? The for operating income is larger than the . Most of the difference between master bus bubble kits than expected. s Bubbles' master budget variance for operating income? Explain why the income statement performance report provides Precious cious Bubbles' managers draw from this performance report? at variance for operating income is This means that operating income is come statement performance report provides Precious Bubbles' managers with more information than the simple master budget varia job by selling kits than expected, at a sale price than expected. selling 5,000 less selling 5,000 more selling 60,000 less selling 60,000 more These variances suggest that the marketing department did a F U U F en actual operating income and master budget operating income? is larger than the nce for operating in om this performan favorable flexible budget variance s favorable volume variance unfavorable flexible budget variance ort provides Preci unfavorable volume variance job by selling kits than expected, at a Most of the difference between master budget operating income and actual operating income resulted from mance report provides Precious Bubbles' managers with more useful information than the simple master budget is an the simple master budget variance. sale price than expected