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

question 340

Multiple Choice

Paulis 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 February, the kennel budgeted for 5,300 tenant-days, but its actual level of activity was 5,320 tenant-days. The kennel has provided the following data concerning the formulas used in its budgeting and its actual results for February: Data used in budgeting:
Actual results for February:
The net operating income in the planning budget for February would be closest to:

• A) $10,200
• B) $20,007
• C) $10,320
• D) $20,101

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Definitions:

Marginal Cost

The supplementary expenditure brought on by the creation of one more unit of a good or service.

Total Variable Cost

The sum of all variable expenses that are incurred in the direct production of goods or services.

AVC

Average Variable Cost, which is the variable cost per unit of output.

Marginal Cost

The production cost for one more unit of a product.