Jackson, Inc

question 118

Multiple Choice

Jackson, Inc., manufactures two products that it sells to the same market. Excerpted below are its budgeted and actual operating results for the year just completed:Industry volume was estimated to be 1,875,000 units at the time the budget was prepared. Actual industry volume for the period was 2,440,000 units. Jackson measures variances using contribution margin.

If fixed costs are budgeted for $500,000 and are actually $500,000, what is the difference between budgeted and actual operating income?

• A) $3,200 favorable.
• B) $5,800 favorable.
• C) $122,500 unfavorable.
• D) $65,550 favorable.
• E) $23,455 favorable.

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Definitions:

Asset Test

A measure to determine a company's ability to quickly convert its assets into cash to cover short-term liabilities.

GAAP

A set of accounting standards and practices that are adhered to by companies to ensure consistency, reliability, and comparability of financial statements.

Segment Reporting

The practice of dividing a company's financial reports to show the performance of different areas of the business, such as geographical regions or product lines.

Reportable Segment

A component of a business that can be separately identified for reporting purposes, often because it engages in operations that generate revenues and expenses.