Pearse Kennel Uses Tenant-Days as Its Measure of Activity; an Animal

question 8

Multiple Choice

Pearse Kennel uses tenant-days as its measure of activity; an animal housed in the kennel for one day is counted as one tenant-day. During December, the kennel budgeted for 3,000 tenant-days, but its actual level of activity was 2,980 tenant-days. The kennel has provided the following data concerning the formulas used in its budgeting and its actual results for December: Data used in budgeting: Actual results for December: The net operating income in the flexible budget for December would be closest to:

• A)$11,200
• B)$11,400
• C)$11,960
• D)$12,121

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Definitions:

Weighted Average

A calculation that takes into account the varying degrees of importance of the numbers in a data set, giving weight to some numbers more than others.

Earnings Per Share

A financial metric calculated by dividing a company's profit available to common shareholders by the average number of outstanding shares, indicating the profitability per share.

Stock Split

The division of a company's existing stock into multiple shares to boost the liquidity of the shares, although the market capitalization remains the same.

SFAS No.123

An accounting standard issued by the Financial Accounting Standards Board (FASB) related to the expensing of stock options, specifying how companies should account for stock-based compensation.