Tiny Toons Distributes Cartoon DVDs That Sell for $12 Each

question 96

Multiple Choice

Tiny Toons distributes cartoon DVDs that sell for $12 each. Tiny Toons pays $7 per DVD to buy the product. Selling costs of $1 per unit are incurred to deliver the DVDs to the customer. This is paid in cash when the product is sold. Tiny Toons has $50,000 per month in fixed selling and administrative expenses (including $3,000 in depreciation) , which are paid half in the month incurred and half in the next month. It is Tiny's policy to maintain an inventory at the end of each month equal to 30% of the next month's projected unit sales.
Tiny Toons makes 30% of sales in cash, and the remainder are on credit. Credit sales are collected in the month after sale. Budgeted monthly sales for the first five months of 2014 are: $$\begin{array} { l l } \text { January } & 20,000 \text { units } \\\text { February } & 22,000 \text { units } \\\text { March } & 26,000 \text { units } \\\text { April } & 28,000 \text { units } \\\text { May } & 40,000 \text { units }\end{array}$$
How much is budgeted income for March using variable costing?

• A) $312,000
• B) $54,000
• C) $57,000
• D) $104,000

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Definitions:

Base Period

A specific time period used as a standard of comparison for financial or economic data.

Analysis Period

The specific span of time for which financial or operational performance is examined and analyzed.

Comparative Statements

Comparative statements are financial statements that provide data for multiple periods side by side, allowing for easy comparison and analysis of performance over time.

Successive Accounting Periods

Consecutive time frames for which a business or organization reports financial information, usually quarterly or annually.