Problem - Nasson Corporation manufactures and sells a single product. The company uses units as the measure of activity in its budgets and performance reports. During August, the company budgeted for 6,700 units, but its actual level of activity was 6,730 units. The company has provided the following data concerning the formulas used in its budgeting and its actual results for August:
Data used in budgeting: Fixed Variable
Fixed element per month Variable element per month
Revenue ................................................................ $0.00 $29.10
Direct labor............................................................ $0.00 $3.60
Direct material ....................................................... 0.00 10.60
Manufacturing overhead ......................................... 47,000.00 1.20
Selling and administrative expenses........................ 21,500.00 0.80
Total expenses........................................................ $68,500.00 $16.20
Actual results for August:
Revenue ............................................................... $201,053
Direct labor............................................................... 24,698
Direct material ......................................................... 72,588
Manufacturing overhead ......................................... 55,606
Selling and administrative expenses........................ 25,554
1. The direct materials in the flexible budget for August would be closest to:
A. $71,020
B. $71,338
C. $72,913
D. $72,264
2. The manufacturing overhead in the flexible budget for August would be closest to:
A. $55,358
B. $55,855
C. $55,076
D. $55,040
3. The net operating income in the flexible budget for August would be closest to:
A. $22,506
B. $18,317
C. $17,930
D. $22,708