Diemert Corporation Bases Its Budgets on Machine-Hours

question 192

Multiple Choice

Diemert Corporation bases its budgets on machine-hours. The company's static planning budget for June appears below:

Actual results for the month were:




-The spending variance for supplies costs in the flexible budget performance report for the month should be:

• A)$5,180 F
• B)$2,420 U
• C)$5,180 U
• D)$2,420 F

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Definitions:

Profit-Maximizing Output

Profit-maximizing output is the quantity of production at which a firm achieves the highest possible profit, where marginal cost equals marginal revenue.

Total Variable Cost

The sum of all costs that vary with the level of output, such as materials and labor, distinct from fixed costs.

Economic Profit

The disparity between total sales and the combined total of explicit and implicit costs.

Profit-Maximizing Output

The level of production at which a firm achieves the highest possible profit, determined by the point where marginal cost equals marginal revenue.