Windsor Limited Makes and Sells a Single Product -Suppose the Company Produces and Sells 25,000 Units Instead of Employs

question 83

Multiple Choice

Windsor Limited makes and sells a single product. The company employs a flexible budgeting system that covers a relevant range from 20,000 units to 25,000 units and a just in time inventory system. Budget data for April, based on 22,000 units, are as follows:
$\begin{array} { | l | r | } \hline \text { Prime costs } & \$ 30 \text { per unit } \\\hline \text { Manufacturing overhead } & \$ 132,000 \text { plus } \$ 3 \text { per unit } \\\hline \text { Selling and administrative expenses } & \$ 30,000 \text { plus } \$ 2 \text { per unit } \\\hline \text { Selling price } & \$ 60 \text { per unit } \\\hline\end{array}$

-Suppose the company produces and sells 25,000 units instead of the original 22,000 units at an average selling price of $55.What is the company's flexible budget operating income (loss) for April,given the actual sales volume of 25,000 units?

• A) $388,000.
• B) $463,000.
• C) $550,000.
• D) $625,000.

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Definitions:

A-not-B Effect

A cognitive error observed in young children where they will search for an object in a location where it was previously found (location A) rather than its new location (location B), even after they see it moved.

Object Location

The specific place or position at which an object resides or can be found.

Object Permanence

The understanding that objects continue to exist even when they cannot be seen, heard, or otherwise sensed.

Conserve

To protect something, especially natural resources, from waste, loss, or damage.