A Company's Master Budget for October Is to Manufacture and Sell

question 37

Multiple Choice

A company's master budget for October is to manufacture and sell 30,000 units, for a total sales revenue of $270,000, total variable costs of $180,000, and total fixed costs of $24,000. The company actually manufactured and sold 32,000 units, and generated $45,000 of operating income in October.

The total flexible-budget (FB) variance for operating income in October, to the nearest dollar, was:

• A) $3,600 unfavorable.
• B) $6,000 unfavorable.
• C) $15,400 unfavorable.
• D) $21,000 unfavorable.
• E) $27,000 unfavorable.

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Definitions:

Vertical Merger

A merger between two or more companies operating at different stages in the production process of a good or service.

Horizontal Merger

A merger between companies that operate in the same industry, often leading to consolidation in the market.

Herfindahl Index

A measure of market concentration, calculated by squaring each company's market share in the industry and then summing the squares.

Market Power

The ability of a company or entity to influence the price and output levels in a market.