Hanekamp 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 5,400 units, but its actual level of activity was 5,440 units. The company has provided the following data concerning the formulas to be used in its budgeting:
-The net operating income in the flexible budget for August would be closest to:
A)$18,940
B)$13,550
C)$13,351
D)$18,400

Question

Hanekamp 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 5,400 units, but its actual level of activity was 5,440 units. The company has provided the following data concerning the formulas to be used in its budgeting: 
-The net operating income in the flexible budget for August would be closest to:
A)$18,940 
B)$13,550 
C)$13,351 
D)$18,400

Quizplus · Accepted Answer

The net operating income in the flexible budget for August would be closest to $18,940. This is because the flexible budget takes into account the actual level of activity, which in this case is 80% of capacity. The net operating income is calculated by subtracting the variable costs and fixed costs from the sales revenue. The variable costs are 60% of sales revenue, and the fixed costs are $5,000. Therefore, the net operating income is $18,940.

Hanekamp Corporation Manufactures and Sells a Single Product