Use the Following Information for the Next 4 Questions

question 115

Multiple Choice

Use the following information for the next 4 questions.
Shipp, Inc. budgets the following costs for a normal monthly volume of 500 units selling for $4,000 each.
-The income (loss) using variable costing when 500 units are produced and 400 units are sold is

• A) $840,000 loss
• B) $160,000 income
• C) $480,000 income
• D) $720,000 loss

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Definitions:

Variable Expenses

Costs that fluctuate with production or sales volume, such as materials, utilities, and commissions.

Fixed Expenses

are costs that do not change with the volume of production or sales, such as rent and salaries.

Sales

The transactions between a company and its customers where goods or services are provided in exchange for money.

Margin of Safety

The difference between actual sales and breakeven sales, indicating how much sales can decrease before a business incurs a loss.