Barry's Breakfast Treats Has Been Selling Only Plain and Cream-Filled

question 64

Multiple Choice

Barry's Breakfast Treats has been selling only plain and cream-filled donuts.Barry believes he can increase his sales by adding a healthy-choice muffin to his menu.He will incur some additional costs such as ingredients, muffin pans and advertisement on the local TV station.Which of the following statements is false?

• A)Barry's fixed costs will probably increase.
• B)Barry's total variable costs will probably increase
• C)Barry should add the muffin only if the increased contribution margin exceeds the increase in revenues.
• D)Barry should add the muffin only if the increased contribution margin exceeds the increase in fixed costs.
• E)All of the above statements are false.

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Definitions:

Direct Materials Budget

A detailed plan showing the amount of raw materials that must be purchased to fulfill the production budget and to provide for adequate inventories.

Production Budget

An estimate of the total amount of production, often expressed in units, that a company plans to manufacture during a specific period.

Finished Goods Inventory

The stock of completed products that are ready to be sold but are still in the company's inventory.

Selling And Administrative Budget

Forecasts expected expenses related to selling the product and managing the business, excluding manufacturing costs.