In September, Larson Inc

question 62

Multiple Choice

In September, Larson Inc. sold 40,000 units of its only product for $240,000, and incurred a total cost of $225,000, of which $25,000 was fixed costs. The flexible budget for September showed total sales of $300,000. Among variances of the period were: total variable cost flexible-budget variance, $8,000U; total flexible-budget variance, $63,000U; and, sales volume variance, in terms of contribution margin, $27,000U.

The amount of operating income in the flexible budget (FB) for September, to the nearest dollar, was:

• A) $40,000.
• B) $48,000.
• C) $56,000.
• D) $70,000.
• E) $78,000.

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Definitions:

Cash Account

A financial account that records the amounts of cash available for transactions or held as reserves.

Variable Manufacturing Overhead

Indirect production costs that vary with the level of production output, such as utilities or raw materials.

Work In Process

A stage in the manufacturing process where items are partially completed but not yet ready to be sold.

Cost Of Goods Sold

The direct costs attributable to the production of goods sold by a company, including both materials and labor costs.