Ridge Is the Manager of a Motel

question 31

Multiple Choice

Ridge is the manager of a motel. As a condition of his employment, Ridge is required to live in a room on the premises so that he would be there in case of emergencies. Ridge considered this a fringe benefit, since he would otherwise be required to pay $800 per month rent. The room that Ridge occupied normally rented for $70 per night, or $2,100 per month. On the average, 90% of the motel rooms were occupied. As a result of this rent-free use of a room, Ridge is required to include in gross income.

• A)$0.
• B)$800 per month.
• C)$2,100 per month.
• D)$1,890 ($2,100 × .90).
• E)None of these.

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Definitions:

Variable Overhead Rate Variance

The difference between the actual variable overhead incurred and the expected overhead based on standard costs.

November

The eleventh month of the Gregorian calendar, following October and preceding December.

Variable Overhead Efficiency Variance

The difference between the expected and actual variable overhead costs, based on the efficient use of production resources.

Variable Overhead Efficiency Variance

The difference between the budgeted and actual variable overhead costs, attributable to differences in the efficiency of utilizing resources.