Loop 1604 Inc. has prepared a static budget at the beginning of the month. At the end of the month the following information is
1 answer:
Answer:
Flexible budget variance for Sales Revenue = $3,960 Favorable
Explanation:
Provided budget is static budget, firstly for calculating flexible budget variance for Sales Revenue.
For this flexible budget is made of same level of quantity as of actual level.
therefore Flexible budget sales = 990 units @ $70 per unit price will be same as of static budget.
Therefore Variance = Standard Flexible Budgeted Sales - Actual Sales
Standard Flexible Budgeted Sales = 990 $70 = $69,300
Actual Sales Revenue = 990 $74 = $73,260
Since actual revenue is more than budgeted sales this is favorable.
Flexible Budget Variance for Sales Revenue = $69,300 - $73,260 = $3,960
Since actual revenue is more than budgeted revenue therefore this is a favorable variance.
Flexible budget variance for Sales Revenue = $3,960 Favorable
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Answer:
a. Decrease
b. Decline
c. Exit
d. No change
Explanation:
The market for gourmet chocolate is in the long-run equilibrium, and an economic downturn has caused the consumer disposable income to fall. Chocolate is a normal good, and the chocolate producers have identical cost structures.
a. This decline in the consumer income will reduce the purchasing power of the consumers. As a result, the demand will decrease. The demand curve will move to the left.
b. This leftward shift in the demand curve will cause the price to decline, As the price falls, the profits earned by the producers will decline as well.
c. In the long run, the firms operate at zero economic profits. So a decline in profits imply that the firms are operating at an economic loss. This will cause the loss incurring firms to exit the market.
d. The long run supply curve will remain the same. It is not affected by change in profits, it changes only with change in the state of technology or availability of resources.
