Rubble Enterprises Develops an Annual Overhead Budget at the Start

question 148

Multiple Choice

Rubble Enterprises develops an annual overhead budget at the start of each year (which has remained unchanged for the last 2 years) , and closes any over- or underapplied overhead at year-end. For the firm's single product the following ending inventory levels have been experienced during the last 7 months: Month Units
December 31 300
January 31 300
February 28 200
March 31 400
April 30 300
May 31 400
June 30 500
In how many months would variable costing income be equal to absorption costing income?

• A)0
• B)1
• C)2
• D)3

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Definitions:

Estimated Bad Debts

An account on the financial statements estimating the amount of receivables that a company does not expect to collect.

Percentage of Sales Method

An accounting technique used to estimate bad debts or the allowance for doubtful accounts based on a predetermined percentage of sales.

Current Revenues

Income generated from the normal business operations within the current accounting period.

Anticipated Current Expenses

Projected expenses that a company expects to incur within the current accounting period.