Johnson Company Had Planned for Operating Income of $10 Million

question 159

Multiple Choice

Johnson Company had planned for operating income of $10 million in the master budget with a contribution margin of $3 million, but actually achieved operating income of only $7 million and a contribution margin of $2.5 million.

• A) The static-budget variance for operating income is $3 million favorable.
• B) The static-budget variance for operating income is $3 million unfavorable.
• C) The flexible-budget variance for operating income is $3 million favorable.
• D) The flexible-budget variance for operating income is $3 million unfavorable.

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Definitions:

Liquidated Assets

are assets that have been converted into cash or cash equivalents by selling them on the open market.

Wrongful Dissolution

The improper termination of a partnership or corporate entity in violation of agreements or legal provisions.

Partnership Agreement

A formal contract between two or more parties to manage and operate a business and share its profits or losses.

Wrongful Dissolution

The improper termination of a legal entity or partnership, which can give rise to legal action for damages.