Question
Sweet Sadie Company is a manufacturer of gourmet dog treats. It currently manufactures 3 different product lines. The manager of each product line is held
Sweet Sadie Company is a manufacturer of gourmet dog treats. It currently manufactures 3 different product lines. The manager of each product line is held responsible for generating revenue and controlling costs. The following information was compiled for the Sweet Potato Bliss product line for the prior period: Actual Results Master Budget 9,000 units 6,000 units Sales Revenue $20,000 $12,000 Variable Manufacturing Costs $6,250 $2,000 Fixed Manufacturing Costs $4,350 $5,000 Variable Operating Costs $1,000 $1,600 Fixed Operating Costs $500 $500 Assume variances are separately calculated for each line listed above. Which of the following statements is correct?
A. The total fixed costs on the flexible budget equals $8,250.
B. If the companys materiality threshold is $200, four of the flexible budget variances should be investigated.
C. The master budget variance for fixed costs is less than the flexible budget variance for fixed costs.
D. The revenue volume variance is unfavorable and the variable cost volume variance is favorable.
E. The product line is considered a cost center.
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