Hathaway Inc.produces and sells golf umbrellas to local resorts.Hathaway anticipates April to be a busy month with the sale of 1000 umbrellas.The company has prepared the following static budget for April:
$\begin{array}{lr}
\text {Sales revenue (1000 units) } &\$5000\
\text { Variable costs:} &\
\text { Direct materials } &5000\
\text { Direct labour} &6000\
\text { Overhead } &1500\
\text { Fixed costs} &\underline{4000}\
\text { Net income}&\underline{\$23500}
\end{array}$

During April,Hathaway actually produced and sold 1200 umbrellas.What should be Hathaway's net income in April based on a flexible budget?
A) $29 000
B) $28 200
C) $31 500
D) $29 300

Question

Hathaway Inc.produces and sells golf umbrellas to local resorts.Hathaway anticipates April to be a busy month with the sale of 1000 umbrellas.The company has prepared the following static budget for April:
$\begin{array}{lr}
  \text {Sales revenue (1000 units)  } &\$5000\
 \text {  Variable costs:} &\
 \text { Direct materials } &5000\
 \text {  Direct labour} &6000\
 \text { Overhead } &1500\
 \text {  Fixed costs} &\underline{4000}\
 \text { Net income}&\underline{\$23500}
\end{array}$

During April,Hathaway actually produced and sold 1200 umbrellas.What should be Hathaway's net income in April based on a flexible budget?
A) $29 000
B) $28 200
C) $31 500
D) $29 300

Quizplus · Accepted Answer

The correct answer is A.The flexible budget for 1200 umbrellas is:Sales revenue (1200 units)  $6000Variable costs:Direct materials $6000Direct labour $7200Overhead $1800Fixed costs $4000Net income $29 000

Hathaway Inc During April,Hathaway Actually Produced and Sold 1200 Umbrellas