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:

Elasticity of Demand

The elasticity of demand measures how responsive the quantity demanded of a good or service is to a change in its price, indicating the sensitivity of consumers to price changes.

Price Discrimination

A pricing strategy where identical or substantially similar goods or services are sold at different prices by the same provider in different markets or to different customers.

Natural Monopoly

A market condition in which a single firm can supply a product or service to an entire market at a lower cost than could two or more firms, often due to economies of scale.

Price Elasticity

The degree to which the quantity demanded of a good changes in response to a change in its price.