Young Corporation Has a High Probability of Operating at 40,000

question 18

Multiple Choice

Young Corporation has a high probability of operating at 40,000 activity hours during the upcoming period, and lower probabilities of operating at 30,000 hours and 50,000 hours. The company's flexible budget revealed the following: $$\begin{array} { l c c c } & \underline { 30,000 \text { Hours } } & \underline { 40,000 \text { Hours } } & \underline { 50,000 \text { Hours } } \\\text { Variable costs } & \$ 135,000 & \$ 180,000 & \$ 225,000 \\\text { Fixed costs } & 720,000 & 720,000 & 720,000\end{array}$$ Young's flexible-budget formula, where Y is defined as total cost and AH represents activity hours, is:

• A) Y = $4.50AH + $24AH.
• B) Y = $4.50AH + $720,000.
• C) Y = $22.50AH.
• D) Y = $180,000 + $18AH.
• E) Y = $945,000.

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Definitions:

Expenses

Outflows of resources or incurring of liabilities (or a combination of both) resulting from a company's activities intended to generate income.

Assets

Economic resources owned or controlled by a business or an individual that are expected to produce value.

Accounting Information System

A system designed to collect, store, manage, process, retrieve, and report financial data for its users.

Financial Statements

Documents that provide an overview of a company's financial condition, including the balance sheet, income statement, and statement of cash flows.