Use the Following Information for the Next 7 Questions

question 42

Multiple Choice

Use the following information for the next 7 questions.
A small accounting firm budgets 200 hours of billings for the next month, and 60% of these hours are expected to be for tax return preparation services, with the remaining 40% for bookkeeping services. Tax work is billed at $50 per hour, and bookkeeping work is billed at $40 per hour. The variable costs for both types of services are $10 per hour. During the month 180 hours were billed, 90 of which were for tax work.
-(Appendix 11A) The contribution margin budget variance was

• A) $720 unfavorable
• B) $540 favorable
• C) $900 unfavorable
• D) $1,200 unfavorable

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Definitions:

Unearned Service Revenue

Income received by a company for services that have not yet been performed, considered a liability until the service is provided.

Service Revenue

Income earned by a company for the services it provides to its customers.

Cash

The most liquid asset, representing currency or its equivalent that can be accessed immediately or near-immediately.

Interest-Bearing Note

A debt instrument where the borrower pays the lender interest over the life of the note, in addition to repaying the principal amount.