Butler Company developed a static budget at the beginning of the company's accounting period based on an expected volume of 4,000 units: $$\begin{array}{l}
\begin{array} {ll }
& \text {pre unit }\
\hline\text { Revenue}&\$4.00\
\text {Variable costs }&1.50\
\text {Contribution margin }&\$2.50\
\text {Fixed costs }&2.00\
\text {Net income }&\$0.50
\end{array}
\end{array}$$ If actual production totals 5,000 units, the flexible budget would show fixed costs of:
A) $10,000.
B) $2 per unit.
C) $8,000.
D) None of these.

Question

Butler Company developed a static budget at the beginning of the company's accounting period based on an expected volume of 4,000 units: $$\begin{array}{l}
\begin{array} {ll } 
& \text {pre unit }\
\hline\text { Revenue}&\$4.00\
\text {Variable costs }&1.50\
\text {Contribution margin }&\$2.50\
\text {Fixed costs }&2.00\
\text {Net income }&\$0.50
\end{array}
\end{array}$$ If actual production totals 5,000 units, the flexible budget would show fixed costs of:
A) $10,000.
B) $2 per unit.
C) $8,000.
D) None of these.

Quizplus · Accepted Answer

Fixed costs are not affected by changes in production volume, so they remain the same at $8,000.

Butler Company Developed a Static Budget at the Beginning of the Company's