Better Blankets, Inc

question 124

Multiple Choice

Better Blankets, Inc. makes a SnuggieBlank using flannel material and trim binding. They have instituted a successful JIT system and thus no longer have to stock inventory prior to their production need. The Standard Cost Card for The SnuggieBlank model is shown.
STANDARD COST CARD

The company reported the following results concerning January:

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The material quantity variance for Trim used in January is:

• A)$5,640 favorable.
• B)$5,640 unfavorable.
• C)$1,440 unfavorable.
• D)$1,440 favorable.

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Definitions:

Contribution Margin Ratio

A measure of the profitability of a product, defined as the difference between the sales price and variable costs, expressed as a percentage of sales price.

Operating Income

EBIT, or earnings before interest and taxes, denotes the income a business generates from its fundamental activities.

Margin Of Safety

The difference between actual sales and break-even sales, providing a cushion against which performance can decline before a business incurs a loss.

Contribution Margin

Contribution Margin is the amount by which sales revenue exceeds variable costs of production, indicating how much revenue contributes to fixed costs and profit.