Dunbar Manufacturing's Variable Costs Are 30% of Sales

question 124

Multiple Choice

Dunbar Manufacturing's variable costs are 30% of sales. The company is contemplating an advertising campaign that will cost $55000. If sales are expected to increase $100000 by how much will the company's net income increase?

• A) $45000
• B) $70000
• C) $30000
• D) $15000

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Definitions:

Standard Quantity

This term refers to the amount of input (materials, labor, etc.) that should be used in the production of a unit of goods under normal conditions.

Standard Price

A pre-determined cost allocated to a single unit of product or service, used for budgeting and performance evaluation.

Ideal Standards

Standards that assume peak efficiency at all times.

Materials Quantity Variance

The difference between the actual quantity of materials used in production and the expected (standard) quantity, multiplied by the standard cost of those materials.