Based on Past Experience,Moss Company Has Developed the Following Budget

question 35

Multiple Choice

Based on past experience,Moss Company has developed the following budget formula for estimating its shipping expenses.The company's shipments average 12 lbs.per shipment: Shipping costs = $16,000 + ($0.50 × lbs.shipped) .The planned activity and actual activity regarding orders and shipments for the current month are given in the following schedule:

$$\begin{array} { | l | r | r | } \hline & \text { Plan } & \text { Actual } \\\hline \text { Sales orders } & 800 & 780 \\\hline \text { Shipments } & 800 & 820 \\\hline \text { Units shipped } & 8,000 & 9,000 \\\hline \text { Sales } & \$ 120,000 & \$ 144,000 \\\hline \text { Total pounds shipped } & 9,600 & 12,300 \\\hline\end{array}$$ The actual shipping costs for the month amounted to $21,000.The appropriate monthly flexible budget allowance for shipping costs for the purpose of performance evaluation would be: (CMA adapted)

• A) $20,680.
• B) $20,920.
• C) $20,800.
• D) $22,150.

---

Definitions:

FIFO Cost Flow

An inventory valuation method in which the costs of the earliest goods purchased are the first to be recognized in determining cost of goods sold.

Current Costs

These are the costs that are associated with the purchase or production of goods and services in the current period.

Current Revenues

Income recognized by a business within its fiscal year, typically from its main operations.

LIFO Cost

An inventory valuation method that assumes the last items placed in inventory are the first sold, implying newer inventory remains unsold.