Johann Builders Has a Fixed -Price Contract Providing $120,000 of Revenue.Construction

question 44

Multiple Choice

Johann Builders has a fixed -price contract providing $120,000 of revenue.Construction on the contract was begun in 2013 and was completed in 2014.Information relating to the contract is as follows: What amount of income should Johann recognize in 2014 assuming that the company appropriately uses the percentage-of-completion method of income recognition?

• A) $9,286
• B) $15,000
• C) $17,000
• D) $7,000

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Definitions:

Flexible Budget

A budget that adjusts or flexes with changes in the level of activity or volume of production.

Manufacturing Overhead

All indirect costs associated with the production process, such as utilities, maintenance, and salaries of production supervisors, not directly tied to the production of an individual product.

Spending Variance

The difference between the budgeted or standard cost of something and its actual cost, often analyzed in budgeting and cost control.

Units

The measures or quantities of a product, service, or resource, which are accounted for in business transactions.