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10. The static budget, at the beginning of the month, for Beacon Banner Company

ID: 2535751 • Letter: 1

Question

10.

The static budget, at the beginning of the month, for Beacon Banner Company follows:
Static budget:
Sales volume: 1100 units; Sales price: $70.00 per unit
Variable costs: $33.00 per unit; Fixed costs: $37,800 per month
Operating income: $2900

Actual results, at the end of the month, follows:
Actual results:
Sales volume: 995 units; Sales price: $75.00 per unit
Variable costs: $35.00 per unit; Fixed costs: $35,000 per month
Operating income: $4800
Calculate the sales volume variance for revenue.

Select one:

A. $7350 U

B. $4975 F

C. $2800 U

D. $3885 U

11.

The static budget, at the beginning of the month, for Divine Décor Company, follows:
Static budget:
Sales volume: 1500 units; Sales price: $70.00 per unit
Variable costs: $32.00 per unit; Fixed costs: $38,000 per month
Operating income: $19,000

Actual results, at the end of the month, follows:
Actual results:
Sales volume: 990 units; Sales price: $75.00 per unit
Variable costs: $35.00 per unit; Fixed costs: $33,000 per month
Operating income: $6600

Calculate the flexible budget variance for sales revenue.

Select one:

A. $6980 F

B. $4950 F

C. $4950 U

D. $6980 U

14.

Worldwide Logistics provides the following information:

What is the company's residual income?

Select one:

A. $600,000

B. $900,000

C. $500,000

D. $1,550,000

Operating income $1,500,000 Net sales $14,000,000 Average total assets $2,000,000 Management's target rate of return 30%

Explanation / Answer

10.

Flexible budget revenues = 995 units * 70 per unit = 69,650

Static budget revenues = 1,100 units * 70 = 77,000

Sales volume variance = Flexible budget amount - Static budget amount

= 69,650 - 77,000

= 7,350 U

The answer is A.

11.

Actual revenues = 990 units * 75 per unit = 74,250

Flexible budget revenues = 990 units * 70 per unit = 69,300

Flexible budget variance for sales revenue = Actual revenues - Flexible budget revenues

= 74,250 - 69,300

= 4,950 F

The answer is B

14.

Residual income = Net income - (Average total assets * Target rate of return)

= 1,500,000 - (2,000,000 * 30%)

= 1,500,000 - 600,000

= 900,000

The answer is B.