Kevin Company Prepared the Following Static Budget for the Year

question 141

Multiple Choice

Kevin Company prepared the following static budget for the year 2015: If a flexible budget was prepared at a volume of 7,000, calculate the amount of operating income.

• A)$3,500
• B)$10,500
• C)$6,500
• D)$4,000

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Definitions:

Periodic Inventory System

An inventory system that updates inventory balances after a set period by taking a physical inventory count.

First-In, First-Out (FIFO)

An inventory valuation method that assumes the first items placed into inventory are the first sold, affecting the cost of goods sold and inventory value.

Perpetual Inventory System

This inventory accounting technique immediately logs purchases or sales of inventory via computerized point-of-sale systems and enterprise asset management software.

Ending Inventory

The price of commodities accessible for purchase following the conclusion of an accounting session.