Snuggle Toys, Inc As the Cost Accountant, Which Single Statement Related to the Month

question 131

Multiple Choice

Snuggle Toys, Inc. had the following summarized results for the month ending July 31:
$\begin{array}{lrrrr}&\text {Actual}&\text {Budget}\\\text { Revenues } & \$ 60,000 & \$ 52,000 \\\text { Costs } & 53,600 & 45,600 \\ \text { Operating profits } & \$ 6,400 & \$ 6,400\end{array}$
As the cost accountant, which single statement related to the above financial results is most appropriate in the report to management?

• A) The departmental manager is performing to expectations because budgeted profits equals actual profits.
• B) Revenues are above budget and a bonus based on this increase should be considered.
• C) Costs as a percentage of revenues are above budget and a further scrutiny of the results might be appropriate.
• D) Costs are 17.5% above budget and the department manager's position should be critically evaluated by senior management.

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Definitions:

Income Tax Expense

The amount of expense that a business recognizes in a given period for the taxes applied on its earnings.

Expired Insurance

The portion of an insurance premium that has been allocated to the expired portion of the policy, representing coverage that has already been provided.

Rent Expense

An expense account that records the cost incurred by a business to rent facilities or equipment for operation purposes.

Utilities Expense

The cost incurred by businesses or individuals for using utilities such as electricity, water, and gas.