The Actual Information Pertains to the Third Quarter

question 71

Multiple Choice

The actual information pertains to the third quarter. As part of the budgeting process, the Duck Decoy Department of Paralith Incorporated had developed the following static budget for the third quarter. Duck Decoy is in the process of preparing the flexible budget and understanding the results.

The flexible-budget variance for variable costs is ________. (Round the final answer to the nearest dollar.)

• A) $17,000 favorable
• B) $33,400 unfavorable
• C) $17,000 unfavorable
• D) $63,000 favorable

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Definitions:

Fixed Costs

Costs that do not vary with the volume of production or sales, such as rent, salaries, and insurance.

Margin of Safety

The difference between actual or projected sales and the break-even point. It measures how much sales can fall before a company incurs a loss.

CVP Income Statement

A financial statement that shows the effects of changes in costs and volume on a company's profits using Cost-Volume-Profit analysis.

Breakeven

The point at which total revenues equal total costs, resulting in neither profit nor loss.