Burruss Company Developed a Static Budget at the Beginning of the Company's

question 85

Multiple Choice

Burruss Company developed a static budget at the beginning of the company's accounting period based on an expected volume of 8,000 units: $\begin{array}{|l|r|}\hline & {\text { Per unit }} \\\hline \text { Revenue } & \$ 4.00 \\\hline \text { Vanable costs } & \underline { 1.50} \\\hline \text { Contribution margin } & \$ 2.50 \\\hline \text { Fixed costs } & \underline { 2.00 }\\\hline \text { Net income } & \underline { \$ 0.50} \\\hline & \\\hline\end{array}$ If actual production totals 10,000 units which is within the relevant range,the flexible budget would show fixed costs of:

• A) $16,000.
• B) $2 per unit.
• C) $20,000.
• D) None of these answers is correct.

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Definitions:

Actual Direct Labor Hours

The real hours worked by employees directly involved in the production process.

Direct Labor Time Variance

The calculation difference between the expected time to produce an item and the actual time taken, impacting cost control and labor efficiency.

Unfavorable Cost Variance

A situation where actual costs exceed the expected or budgeted costs, indicating that a company is spending more than planned.

Revenue Volume Variance

The difference between the actual sales revenue received and the expected revenue, based on the budgeted sales volume.