The Static Budget,at the Beginning of the Month,for Redwyne Company $\$ 50.00$

question 189

Multiple Choice

The static budget,at the beginning of the month,for Redwyne Company follows: Static budget:
Sales volume: 2,000 units; Sales price: $\$ 50.00$ per unit
Variable costs: $\$ 14.00$ per unit; Fixed costs: $\$ 25,000$ per month
Operating income: $\$ 47,000$


Actual results, at the end of the month, follows:
Actual results:
Sales volume: 1,900 units; Sales price: $\$ 58.50$ per unit
Variable costs: $\$ 16.00$ per unit; Fixed costs: $\$ 33,000$ per month
Operating income: $\$ 47,750$
Calculate the flexible budget variance for variable costs.

• A)$30,400 U
• B)$4,350 U
• C)$3,800 U
• D)$26,600 F

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Definitions:

Market Rate

The prevailing interest rate available in the marketplace for loans or investments of similar risk and maturity.

Contractual Rate

The interest rate stated in a contract, such as in a loan agreement or bond indenture, determining the amount of interest payments.

Premium on Bonds Payable

The amount by which the sale price of a bond exceeds its face value, reflecting higher-than-market interest rates or increased demand for the bond.

Amortization

The process of spreading out a loan or intangible asset cost over a fixed period of time for accounting and tax purposes.