Juanita Knits Blankets as a Hobby and Sells Them

question 201

Multiple Choice

Juanita knits blankets as a hobby and sells them. In the current year, she earns $5,000 from her blanket sales and incurs expenses of $600. On her tax return, she should

• A) report no hobby income and no hobby deductions.
• B) report $5,000 of hobby income and deduct $600 of hobby expenses from AGI.
• C) report $5,000 of hobby income, but she will not be able to take any deductions.
• D) report $5,000 of hobby income and deduct $600 of hobby expenses for AGI.

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Definitions:

Raw Materials Quantity Variance

The difference between the actual quantity of raw materials used in production and the standard quantity expected to be used, multiplied by the standard cost per unit of raw material.

Raw Materials Price Variance

The difference between the actual cost of raw materials purchased and the standard or expected cost, reflecting variances in purchase prices.

Raw Materials Quantity Variance

The difference between the expected and actual quantity of raw materials used in production, affecting manufacturing costs.

Materials Price Variance

This is the difference between the actual cost of direct materials and the standard cost, multiplied by the quantity purchased.