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

question 7

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 sales volume variance, in terms of operating income, for October (rounded to the nearest whole dollar) was:

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

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Definitions:

Normal Good

A type of good for which demand increases as consumer income rises, and decreases as consumer income falls.

Income Elasticity

Income elasticity of demand measures how much the quantity demanded of a good changes as consumer income changes.

Low-quality Beef

This refers to beef that does not meet certain standards of texture, flavor, or nutritional value.

Cross-price Elasticity

Cross-price elasticity measures how the quantity demanded of one good responds to a change in price of another good, indicating the degree of substitutability or complementarity between them.