Atwood Dairy Bar Sells Its Famous Soft-Serve Ice Cream Cones

question 115

Multiple Choice

Atwood Dairy Bar sells its famous soft-serve ice cream cones near a marina and resort area.The owner,Theresa,wants to determine the cost behavior patterns to help planning for the next summer season.She has the following information available about the operating costs and the number of soft-serve cones served. $$\begin{array} { | l | c | c | } \hline { \text { Month } } & \text { Number of soft-serve cones } & \text { Total aperatine costs } \\\hline \text { April } & 8,200 & \$ 5,200 \\\hline \text { May } & 8,600 & \$ 5,500 \\\hline \text { June } & 7,500 & \$ 4,500 \\\hline \text { July } & 9,700 & \$ 6,000 \\\hline \text { August } & 8,900 & \$ 5,900 \\\hline \text { September } & 5,700 & \$ 5,000 \\\hline\end{array}$$ Theresa uses the high-low method to determine the operating cost equation and sells 8,000 cones in a month for $2.00 each.
-What would the operating income be if she prepared a traditional income statement for the month?

• A)$16,000
• B)$14,000
• C)$10,425
• D)$2,000

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Definitions:

Carrying Amount

The book value of assets or liabilities on a company's balance sheet, calculated as the original cost minus any depreciation, amortization, or impairment charges.

Equity Method

A method of accounting whereby the investment is initially recognised at cost and adjusted thereafter for the post-acquisition change in the investor’s share of the investee’s net assets. The investor’s profit or loss includes its share of the investee’s profit or loss and the investor’s other comprehensive income includes its share of the investee’s other comprehensive income.

Investment

An asset or item acquired with the goal of generating income or appreciation over time.

Carrying Amount

The amount at which an asset or liability is recognized in the balance sheet, which can be the historical cost less any depreciation, amortization, or impairment.