Classic Loungers Is in the Process of Preparing a Production

question 88

Multiple Choice

Classic Loungers is in the process of preparing a production cost budget for August.Actual costs in July for 200 chaise lounge chairs were: $$\begin{array} { l r } \text { Materials cost } & 6,000 \\\text { Labor cost } & 8,000 \\\text { Rent } & 2,000 \\\text { Depreciation } & 4,000 \\\text { Other fixed costs } & 5,000 \\\text { Total } & \$ 25,000 \\\hline\end{array}$$ Each chair was sold for $140 in July.Management estimates that sales will increase to 230 chairs during August if the company lowers the selling price to $130 per chair.Materials and labor are the only variable costs.How much is the incremental cost of producing an extra 30 chairs?

• A)$1,900
• B)$2,100
• C)$3,750
• D)$(200)

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Definitions:

Dividends Payable

A liability recorded on a company's balance sheet representing the amount of dividends it owes to shareholders.

Retained Earnings

Profits that a company has decided to keep and reinvest in the business, rather than distribute to shareholders as dividends.

Contra-stockholders' Equity

An account that reduces the total amount of stockholders' equity, such as treasury stock or accumulated deficits.

Treasury Stock

Shares that were once a part of the float and sold but have since been repurchased by the issuing company and held in its treasury.