Exhibit 7-1 Sally Owns a Small Business That She

question 168

Multiple Choice

Exhibit 7-1 Sally owns a small business that she operates in a small building she owns.Given the information in Exhibit 7-1, Sally's accounting profit is

• A)$80, 000
• B)$50, 000
• C)$65, 000
• D)$35, 000
• E)$24, 000

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Definitions:

Volume Variance

The difference between the budgeted fixed overhead at 100% of normal capacity and the standard fixed overhead for the actual units produced.

Factory Overhead Cost

All of the costs of producing a product except for direct materials and direct labor.

Normal Capacity

The average level of operational output or activity that a company can sustain over a long period, considering fluctuations in demand and maintenance schedules.

Cost Variance

The difference between the actual cost and the standard or planned cost in a budget.