Maxim Fasteners Distributes Giant Binder Clips That Sell for $3

question 69

Multiple Choice

Maxim Fasteners distributes giant binder clips that sell for $3 each. Maxim pays $1.20 each to buy the clips. The company has $4,000 per month in fixed costs. Policies and other information follow:
.Inventory is maintained at the end of each month equal to 10% of the next month's projected sales in units.
.Purchases are paid 40% in the month acquired and the balance in the month after.
.All sales are on credit, and 30% are collect in the month of sale and 70% in the month after sale.
.Budgeted monthly sales in units for the first five months of 2014 are as follows:

$\begin{array}{ll}\text { January } & 6,000 \text { units } \\\text { February } & 5,000 \text { units } \\\text { March } & 7,000 \text { units } \\\text { April } & 9,000 \text { units } \\\text { May } & 8,000 \text { units }\end{array}$
.Variable selling and administrative costs are $0.50 per clip and are paid in the month of incurred.
How much is budgeted net income for March using variable costing?

• A) $9,100
• B) $5,100
• C) $12,600
• D) $13,500

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Definitions:

Rental Income

Rental income refers to the revenue received from leasing property or other assets to tenants.

Income Statement

A financial report that shows a company's revenues, expenses, and profit or loss over a specific period of time.

Owner's Equity Statement

A financial document showing the starting balance, additions and subtractions, and the ending balance of the owner’s equity account.

Freight-In

The cost associated with transporting goods into a business from suppliers, considered part of the cost of purchasing inventory.