Steve Harvey Company Uses Absorption Costing and Reports the Following

question 83

Multiple Choice

Steve Harvey Company uses absorption costing and reports the following information:
Variances
$\begin{array} { l } \text {Production Volume Variance }& \text {\( \$ 70,000 \) Unfavorable }\\ \text {Flexible Budget Variance for Fixed Factory Overhead }& \text { \( \$ 100,000 \) Unfavorable}\\ \text {Flexible Budget Variance for Variable Overhead }& \text { \( \$ 40,000 \) Favorable}\\ \text {Flexible Budget Variance for Direct Materials }& \text { \( \$ 20,000 \) Favorable}\\\end{array}$

Before consideration of the above variances,the company has operating income of $1,500,000.What is the operating income after considering the above variances?

• A) $1,330,000
• B) $1,390,000
• C) $1,400,000
• D) $1,560,000

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Definitions:

Purchase Price

The amount of money that is paid to acquire a good, service, or asset.

Discharged

Released from a legal obligation, duty, or liability.

Operation of Law

Changes in rights, duties, or obligations automatically enforced by the legal system without the need for action by the parties involved.

Condition Precedent

A condition in a contract that must be met before a party's promise becomes absolute.