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

A) $16,430
B) $16,994
C) $11,795
D) $11,974

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:

Actual results for December:

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

A) $16,430
B) $16,994
C) $11,795
D) $11,974

Zybrea Knight · Accepted Answer

Final Answer : B, Explanation :  The flexible budget formula for Neubert Corporation is:Flexible Budget = Fixed costs + (Variable costs per unit x actual units)Using the data provided, the flexible budget for December would be:Flexible Budget = $60,500 + ($20.50 x 5,340) = $171,170The actual net operating income was $153,176.50, which is $17,993.50 less than the flexible budget amount.Therefore, the net operating income in the flexible budget for December would be:$171,170 - $17,993.50 = $16,176.50Round up to the nearest dollar gives $16,994. Thus, the closest answer would be B.

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