1) McCabe Manufacturing Co.\'s static budget at 8,000 units of production includ

Question

1) McCabe Manufacturing Co.'s static budget at 8,000 units of production includes $40,000 for direct labor and $4,000 for electric power. Total fixed costs are $23,000. At 9,000 units of production, a flexible budget would show:

a. variable costs of $49,500 and $25,875 of fixed costs
b. variable costs of $44,000 and $23,000 of fixed costs
c. variable costs of $49,500 and $23,000 of fixed costs
d. variable and fixed costs totaling $75,375

2) The anticitpated purchase of a fixed asset for $400,000 with a useful life of 5 years and no residual value is expected to yield total income of $150,000. The expected average rate of return, giving effect to depreciation on investment is 15%.

a.True b. False

Explanation / Answer

1) c. variable costs of $49,500 and $23,000 of fixed costs 2) a. True

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