Johnson Construction Materials Company Has a Sales Office That Sells

question 107

Multiple Choice

Johnson Construction Materials Company has a sales office that sells concrete culvert pipes to property developers.The sales office is a revenue center and prepares a monthly responsibility report.The following information is provided. $$\begin{array}{l}\quad\quad\quad\quad\quad\quad\quad\quad\text { Revenue Center Responsibility Report }\\\begin{array} { |c | c | c | l | c | c | c | c| } \hline \begin{array} { c } \text { Product } \\\text { Type }\end{array} & \begin{array} { c } \text { Actual } \\\text { Sales } \\\text { Revenue }\end{array} & \begin{array} { c } \text { Flexible } \\\text { Budget } \\\text { Variance }\end{array} & \text { U/F } & \begin{array} { c } \text { Flexible } \\\text { Budget }\end{array} & \begin{array} { c } \text { Sales } \\\text { Volume } \\\text { Variance }\end{array} & \text { U/F } & \begin{array} { c } \text { Static } \\\text { Budget }\end{array} \\\hline 40 \text { inch } & \$ 31,700 & & & \$ 30,000 & & & \$ 40,800 \\\hline 36 \text { inch long } & 40,200 & & & 42,200 & & & 33,000 \\\hline 36 \text { inch short } & 36,000 & & & 33,100 & & & 31,100 \\\hline \text { 32 inch } & 19,100 & & & 20,900 & & & 28,000 \\\hline\end{array}\end{array}$$ What is the flexible budget variance for the 40-inch pipe?

• A)$1,700 U
• B)$10,800 F
• C)$10,800 U
• D)$1,700 F

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Definitions:

Percent of Receivables Method

An accounting technique used to estimate the amount of a company's accounts receivable that will not be collected, based on a percentage of the total accounts receivable.

Perpetual Inventory System

This is an accounting method that continuously updates inventory records for each sale or purchase of inventory.

Allowance for Doubtful Accounts

A contra-account that reduces the total receivables reported on the balance sheet to reflect the amount expected to be collected.

Perpetual Inventory System

The perpetual inventory system continuously updates inventory records for each purchase and sale transaction, providing real-time inventory levels.