At the End of 2009, SWP Prepared Its Master Budget

question 72

Multiple Choice

At the end of 2009, SWP prepared its master budget for 2010. Selected amounts from that budget, along with actual results for 2010, are presented below: Which items in the table have unfavorable variances?

• A) Marketing expense and cost of goods sold
• B) Cost of goods sold and sales
• C) Interest revenue and research and development expense
• D) Interest revenue and cost of goods sold

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Definitions:

Variable Costing

An accounting method that only considers variable costs (costs that change with production levels) in product pricing and decision making, excluding fixed costs.

Absorption Costing

is an accounting method that includes all manufacturing costs - direct materials, direct labor, and both variable and fixed manufacturing overhead - in the cost of a product.

Fixed Manufacturing Overhead

Costs related to manufacturing that do not vary with the level of production, such as rent, salaries, and utility costs for the factory.

Absorption Costing

An accounting method that includes all manufacturing costs (direct materials, direct labor, and both variable and fixed overhead) as part of the cost base of a product.