Question

Neubert Corporation manufactures and sells a single product. The company uses units as the measure of activity in its budgets and performance reports. During December, the company budgeted for 5,300 units, but its actual level of activity was 5,340 units. The company has provided the following data concerning the formulas used in its budgeting and its actual results for December:

Data used in budgeting:

	Fixed Element per Month			Variable element per unit
Revenue		-		$	30.00
Direct labor	$	0		$	3.50
Direct materials		0			10.40
Manufacturing overhead		33,300			1.50
Selling and administrative expenses		25,000			0.50
Total expenses	$	58,300		$	15.90

Actual results for December:

Revenue	$	156,340
Direct labor	$	17,980
Direct materials	$	56,566
Manufacturing overhead	$	41,040
Selling and administrative expenses	$	28,870

The net operating income in the flexible budget for December would be closest to:

Garrison 16e Rechecks 2018-06-07

Multiple Choice

$16,430

$16,994

$11,795

$11,974

Answer 1

• All working forms part of the answer

							Flexible Budget
Units (q)							5,340
Revenues				$ 30.00			$ 160,200.00
Direct Labor	(	$                 -	)	3.5	x 5340 units		$    18,690.00
Direct Materials	(	$                 -	+	$ 10.40	x 5340 units	)	$    55,536.00
Manufacturing Overhead	(	$ 33,300.00	+	$    1.50	x 5340 units	)	$    41,310.00
Selling & administrative expenses	(	$ 25,000.00	+	$    0.50	x 5340 units	)	$    27,670.00
Total Expenses		$ 58,300.00		$ 15.90			$ 143,206.00
Net Operating Income							$    16,994.00 = ANSWER

• Correct Answer = Option #2 $ 16,994