Lenci Corporation Manufactures and Sells a Single Product

question 75

Multiple Choice

Lenci Corporation manufactures and sells a single product. The company uses units as the measure of activity in its budgets and performance reports. During May, the company budgeted for 5,120 units, but its actual level of activity was 5,070 units. The company has provided the following data concerning the formulas used in its budgeting and its actual results for May:Data used in budgeting: Actual results for May:
The spending variance for manufacturing overhead in May would be closest to:

• A) $400 U
• B) $475 U
• C) $475 F
• D) $400 F

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Definitions:

Average Fixed Cost

The total fixed costs of production divided by the quantity of output produced, indicating how fixed costs dilute with increased production.

AFC Curve

The Average Fixed Cost curve, depicting how the fixed costs of production spread over different quantities of output affect the total cost per unit.

MC Curve

The Marginal Cost curve, representing the increase in total cost incurred from producing one additional unit of a good or service.

AVC Curve

The graph that represents the average variable cost per unit of output at different levels of production.