Exhibit 10-2 Benny's Bakery Produces Bagels for Resale at Local Grocery Stores.The

question 36

Multiple Choice

Exhibit 10-2
Benny's Bakery produces bagels for resale at local grocery stores.The master budget indicates that the company expects to use 2.5 pounds of direct materials for each unit produced at a cost of $10.00 per pound (one unit = one batch of bagels) .Each unit produced will require 0.30 direct labor hours at a cost of $24.00 per hour.Variable manufacturing overhead is applied based on direct labor hours at a rate of $4.80 per hour.Last year's sales were expected to total 40,000 units.Benny just received last year's actual results showing sales of 35,000 units.
-Refer to Exhibit 10-2.What amount would the flexible budget show for variable manufacturing overhead?

• A)$50,400
• B)$57,600
• C)$560,000
• D)$168,000
• E)None of the answer choices is correct.

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Definitions:

Operating Leverage

Operating leverage is a measure of how revenue growth translates into growth in operating income, indicating the extent to which a company can increase its profits by increasing sales.

Modigliani-Miller Model

A foundational financial theory proposing that the market value of a company is determined by its earning power and risk of its underlying assets, and is independent of the way it chooses to finance its investments or distribute dividends.

Restructuring

The process of reorganizing a company's structure, operations, or debt to improve efficiency or manage financial challenges.

Tax Effect

The impact of taxation on business decisions, investments, and net income, considering both current and future taxes.