Based on Predicted Production of 12,000 Units, a Company Anticipates

question 56

Multiple Choice

Based on predicted production of 12,000 units, a company anticipates $150,000 of fixed costs and $123,000 of variable costs. The flexible budget amounts of fixed and variable costs for 10,000 units are:

• A) $125,000 fixed and $102,500 variable.
• B) $125,000 fixed and $123,000 variable.
• C) $102,500 fixed and $150,000 variable.
• D) $150,000 fixed and $123,000 variable.
• E) $150,000 fixed and $102,500 variable.

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Definitions:

Profit Margin

A financial metric expressing the percentage of revenue that remains as profit after all expenses are deducted from gross sales.

Target Cost

The desired cost of producing a product, determined by subtracting a desired profit margin from a competitive market price, aimed at ensuring market competitiveness.

Traditional Costing Systems

Costing methods that assign manufacturing overhead to products based on a predetermined overhead rate, often using direct labor hours as the allocation base.

Design Costs

Expenses associated with the process of creating and developing a plan or specification for the production of objects or systems.