Suppose the Standard for a Given Cost During a Period

question 113

Multiple Choice

Suppose the standard for a given cost during a period was $80,000.The actual cost for the period was $72,000.Under what circumstances would you consider the variance from budget to be a positive performance indication?

• A)The cost is fixed,and actual production was 90 percent of the standard level of budgeted production.
• B)The cost is variable,and the standard cost noted above is the cost at a production level lower than the actual production level.
• C)The cost is variable,and actual production was 90 percent of the standard level of production.
• D)The cost is variable,and actual production was 75 percent of the standard level of production.

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Definitions:

Limited Liability

Limited liability is a legal structure where a company's owners are not personally liable for the company's debts or liabilities beyond their initial investment.

Debts

Money owed by one party, the borrower, to a second party, the lender; an obligation to pay back a borrowed sum with interest.

Management Compensation

The total remuneration, including salary, bonuses, and benefits, given to executives and managers in a company.

Agency Problem

A conflict of interest inherent in any relationship where one party is expected to act in another's best interest.