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

question 123

Multiple Choice

Stent 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 February, the kennel budgeted for 3,000 tenant-days, but its actual level of activity was 2,950 tenant-days. The kennel has provided the following data concerning the formulas used in its budgeting and its actual results for February:
-The wages and salaries in the planning budget for February would be closest to:

• A) $22,670
• B) $24,183
• C) $23,780
• D) $23,000

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Definitions:

Variable Costing

An accounting method that includes only variable production costs (direct materials, direct labor, and variable manufacturing overhead) in product costs.

Fixed Manufacturing Overhead

is the sum of all the production costs that do not change with the level of output, including costs like factory rent, salaries of permanent employees, and depreciation of factory equipment.

Direct Labour

Labor of employees engaged directly in the manufacturing process or production work, essential for creating the product.

Operating Leverage

Operating leverage is a measure of how revenue growth translates into growth in operating income, indicating the degree to which a company can increase profitability through its fixed costs structure.