Onyx Company Has Prepared a Static Budget at the Beginning

question 173

Multiple Choice

Onyx Company has prepared a static budget at the beginning of the month. At the end of the month, the following information has been retrieved from the records. Static budget:
Sales volume: 2,000 units: Price: $50 per unit
Variable expense: $12 per unit: Fixed expenses: $25,000 per month
Operating income: $51,000
Actual results:
Sales volume: 1,800 units: Price: $58 per unit
Variable expense: $16 per unit: Fixed expenses: $35,000 per month
Operating income: $40,600
Calculate the sales volume variance for operating income.

• A)$2,970 U
• B)$5,490 F
• C)$7,600 U
• D)$5,110 F

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Definitions:

Percent of Receivables Method

A method used in accounting to estimate bad debts expense based on a percentage of accounts receivable judged to be uncollectible.

Unadjusted Trial Balance

A financial report that shows the balances of all accounts, including assets, liabilities, equity, income, and expenses before any adjustments are made for the accounting period.

Bad Debts Expense

An expense reported on the income statement reflecting the cost of accounts receivable that a company does not expect to collect.

Factoring Fee Expense

A cost incurred by a business when it sells its accounts receivable to a third party (the factor) at a discount.