Use the Following Information for Questions

question 24

Multiple Choice

Use the following information for questions.
Gomez, Inc.began work in 2010 on contract #3814, which provided for a contract price of $7,200,000.Other details follow:

-Assume that Gomez uses the cost-recovery method of accounting.The portion of the total gross profit to be recognized as income in 2011 is

• A)$900,000.
• B)$1,350,000.
• C)$2,325,000.
• D)$7,200,000.

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Definitions:

Budget Variance

The difference between the budgeted amount of expense or revenue, and the actual amount of expense or revenue incurred.

Volume Variance

The difference between the budgeted fixed overhead and the applied fixed overhead, which is usually driven by a difference in actual production volume and the expected production volume.

Materials Price Variance

The variance between the real expense of materials and their anticipated (standard) price.

Raw Material

The basic substances or components that are processed or used in the manufacturing of goods.