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P23-27A AllTalk Technologies

Price: $3.50



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



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?

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