Bob's Burgers Bob's Burgers Currently Produces and Sells 12,000 Burgers

question 9

Multiple Choice

Bob's Burgers Bob's Burgers currently produces and sells 12,000 burgers per month with the following costs:
Bob has recently switched food suppliers and anticipates that variable costs will decrease by $0.35 per unit. In addition, Bob has renegotiated his store lease and fixed costs will be dropping by $8,000 per month.
Refer to the information provided for Bob's Burgers. What will be Bob's new cost equation?

• A) Total costs = $60,000 + $2.75x
• B) Total costs = $60,000 + $2.05x
• C) Total costs = $8,000 + $0.35x
• D) Total costs = $52,000 + $2.05x

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Definitions:

Unfavorable Variance

A situation where actual costs exceed budgeted or expected costs.

Efficiency Variance

The difference between the actual input used in production and the standard input that was expected to be used.

Spending Variance

The difference between the actual amount spent and the budgeted amount for a category or period, indicating over or underspending.

Quantity Variance

The difference between the actual quantity of materials or labor used in production and the expected (or standard) quantity.