Answer the Following Questions Using the Information Below:
Skizone Company's

question 102

Multiple Choice

Answer the following questions using the information below:
Skizone Company's 4-Variance Analysis:
$$\begin{array} { | l | l | l | l | } \hline & & & \text { Production-Volume } \\ & \text { Spending Variance } & \text { Efficiency Variance } & \text { Variance } \\\hline \text { Variable overhead } & \$ 6,500 \mathrm {~F} & \$ 12,000 \mathrm { U } & \text { No variance } \\\hline \text { Fixed overhead } & \text { (a) } & \text { No variance } & \$ 46,000 \mathrm { U } \\\hline\end{array}$$
-If Skizone's combined 4-Variance Analysis shows an unfavorable spending variance of $2,300,what is the fixed overhead spending variance (a) ?

• A) $8,800 favorable
• B) $4,200 unfavorable
• C) $8,800 unfavorable
• D) $4,200 favorable

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Definitions:

Capital Structure

The composition of a company's liabilities and equity, defining how it finances its overall operations and growth.

M&M Proposition I

A principle of corporate finance stating that the value of a firm is unaffected by how it is financed, in the absence of taxes, bankruptcy costs, and asymmetric information.

Interest Tax Shield

The reduction in income taxes that results from taking allowable deductions for interest expenses.

Capital Structure

The mix of different forms of external financing used by a company, including debt, equity, and hybrid securities.