Answer the Following Questions Using the Information Below:
as Part

question 24

Multiple Choice

Answer the following questions using the information below:
As part of the budgeting process,Lillee's Petanque Company developed the following static budget for August.Lillee is in the process of preparing the flexible budget and understanding the results.The actual results are for the month of August.
$\begin{array}{lrlr}&\text { Actual } & \text { Flexible } & \text { Static } \\&\text { Results } & \text { Budget } & \text { Budget }\\\text { Sales volume (in units) } & 20000 &\underline{\quad\quad} & 25000 \\& & & \\\text { Sales revenues } & \$ 1000000 & \$ & \$ 1250000 \\\text { Variable costs } & \underline{512000} & \$ \underline{\quad\quad}& \underline{600000} \\& & & \\ \text { Contribution margin } & 488000 & \$ & 650000 \\& & &\\\text { Fixed costs } & 458000 & \$ \underline{\quad\quad}& 450000 \\\text { Operating profit } & \$ 30000 & \$ \underline{\quad\quad}& \$ 200000\end{array}$
-The PRIMARY reason for low operating profits was:

• A)increased fixed costs.
• B)the variable-cost variance.
• C)a poor management accounting system.
• D)lower sales volume than planned.

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Definitions:

TVC

Total Variable Costs; the sum of all costs that vary with the level of production, such as materials and labor directly involved in creating a product.

Total Fixed Cost

The sum of all costs that remain constant regardless of the level of production or output in the short term.

Marginal Product

The additional output that can be produced by adding one more unit of a specific input, holding all other inputs constant.

Total Cost

The total of all costs associated with producing goods or services, encompassing both constant and fluctuating expenses.