AllTalk Technologies manufactures capacitors for cellular base stations

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P23-27A Preparing an income statement performance report [30 min]
AllTalk Technologies manufactures capacitors for cellular base stations and other
communications applications. The company’s January 2012 flexible budget income
statement shows output levels of 6,500, 8,000, and 10,000 units. The static budget
was based on expected sales of 8,000 units

ALLTALK TECHNOLOGIES
Flexible Budget Income Statement
Month Ended January 31, 2012
Variable expenses
Operating income
Sales revenue
Fixed expenses
Per Unit By units (capacitors)
$6,500 8,000 10,000
Sales revenue $24, 156,000 192,000 240,000
and so on ....


The company sold 10,000 units during January, and its actual operating income was
as follows:

Requirements
1. Prepare an income statement performance report for January.
2. What was the effect on AllTalk’s operating income of selling 2,000 units more
than the static budget level of sales?
3. What is AllTalk’s static budget variance? Explain why the income statement performance
report provides more useful information to AllTalk’s managers than
the simple static budget variance. What insights can AllTalk’s managers draw
from this performance report?