A Company Has the Following Information for Its First Month

question 130

Multiple Choice

A company has the following information for its first month of operations: $\begin{array}{ll}\hline \text { Raw materials used } & \$ 25,000 \\\text { Sales (\$65 per unit) } & \$ 78,000 \\\text { Directlabor } & \$ 42,000\\\text { Variable factory overhead }&\$17,000\\\text { Fixed factory overhead unknown }\\\text { Variable sellingand administrative }&\$3,000\\\text { Fixed sellingand administrative }&\$5,000\\\text { Gross profit }&\$30,000\\\text { Contributionmargin }&\text { unknown }\\\end{array}$
Ending inventories:
Raw materials $\quad$$\$ 7,000$
WIP none
Finishedgoods $\quad$$\quad$$\quad$ 1,200units The total contribution margin under variable costing is:

• A) $21,000
• B) $34,500
• C) $7,000
• D) $33,000

---

Definitions:

Sales Price Variance

The difference between the actual selling price of a product and its budgeted or planned selling price, multiplied by the actual quantity sold.

Opening Stock

The value of goods available for sale at the beginning of an accounting period.

Flexible Budget

A budget that adjusts or flexes with changes in the volume or activity level, allowing for more accurate forecasting and planning.

Indirect Labour Cost

Expenses related to employees that cannot be directly traced to specific products or services, such as maintenance staff or supervisors.