Grohs Kennel Uses Tenant-Days as Its Measure of Activity; an Animal

question 357

Multiple Choice

Grohs Kennel uses tenant-days as its measure of activity; an animal housed in the kennel for one day is counted as one tenant-day. During December, the kennel budgeted for 2,500 tenant-days, but its actual level of activity was 2,530 tenant-days. The kennel has provided the following data concerning the formulas to be used in its budgeting: The net operating income in the planning budget for December would be closest to:

• A) $8,150
• B) $11,914
• C) $8,483
• D) $11,633

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Definitions:

Fixed Overhead

This refers to the consistent, non-variable costs incurred by a business, regardless of its level of production or sales volumes.

Variable Overhead

Costs that vary with the level of production output, such as utilities for machines and indirect materials.

Direct Labor Hours

The total hours worked by employees directly involved in the production of goods or services.

Variable

An element, feature, or factor that is liable to vary or change.