Figure 16-2
Glenn, SA Following Are the Actual Costs of Producing 75,000 T-Shirts: 5,000

question 58

Multiple Choice

Figure 16-2
Glenn, SA., has done a cost analysis for its production of T-shirts. The following activities and cost drivers have been developed: $\begin{array}{ll}\text { Activity } & \text { Cost Formula } \\\text { Maintenance } & £ 11,000+£ 2 \text { per machine hour } \\\text { Machining } & £ 55,000+£ 3 \text { per machine hour } \\\text { Inspection } & £ 70,000+£ 500 \text { per batch } \\\text { Setups } & £ 2,000 \text { per batch } \\\text { Purchasing } & £ 80,000+£ 150 \text { per purchase order }\end{array}$ Following are the actual costs of producing 75,000 T-shirts: 5,000 machine hours; 10 batches; 20 purchase orders $\begin{array}{lr}\text { Maintenance } & £ 20,000 \\\text { Machining } & 73,000 \\\text { Inspection } & 73,000 \\\text { Setups } & 18,000 \\\text { Purchasing } & 82,000\end{array}$
-Refer to Figure 16-2. What is the budget variance for inspection in an activity-based performance report?

• A)£1,000 F
• B)£2,000 F
• C)£3,000 F
• D)none of the above

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Definitions:

Substitutes

Goods or services that can replace each other in use or consumption, such that an increase in the price of one leads to an increase in demand for the other.

Marginal Revenue

Marginal revenue is the additional revenue that a firm gains from selling one more unit of a good or service.

Demand Curve

A graph showing the relationship between the price of a good and the quantity demanded by consumers at those prices.

Price

The cost in money to purchase a particular good or service.