Summer Nights Sells Bottles of Bug Spray for $6

question 72

Multiple Choice

Summer Nights sells bottles of bug spray for $6.50 each.Variable costs are $3.00 per bottle,while fixed costs are $44,000 per month for volumes up to 30,000 bottles of spray and $54,000 per month for volumes above 30,000 bottles of spray.The flexible budget would reflect monthly operating income for 19,000 bottles of lotion and 24,000 bottles of lotion of what dollar amounts?

• A)$79,500 and $40,000,respectively
• B)$22,500 and $40,000,respectively
• C)$123,500 and $156,000,respectively
• D)$12,500 and $102,000,respectively

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Definitions:

Variable Overhead Rate Variance

This refers to the difference between what the variable overhead costs were expected to be versus what they actually were, measured against the standard cost of production.

Manufacturing Overhead

The indirect factory-related costs that are incurred when a product is manufactured, including costs such as maintenance, utilities, and quality control.

Standard Costing System

An accounting method that uses standard costs for product cost planning and control, involving setting predetermined costs for manufacturing activities.

Variable Overhead Efficiency Variance

Measures the difference between the actual hours taken to produce an item and the standard hours expected, multiplied by the variable overhead rate per hour.