Question

In: Accounting

. Moore Company produces a single product. During last year, Moore’s variable production costs totaled $10,000...

. Moore Company produces a single product. During last year, Moore’s variable production costs totaled $10,000 and its fixed manufacturing overhead costs totaled $6,800. The company produced 5,000 units during the year and sold 4,600 units. There were no units in the beginning inventory. Which of the following statements is true? A. The net operating income under absorption costing for the year will be $800 higher than net operating income under variable costing. B. The net operating income under absorption costing for the year will be $544 higher than net operating income under variable costing. C. The net operating income under absorption costing for the year will be $544 lower than net operating income under variable costing. D. The net operating income under absorption costing for the year will be $800 lower than net operating income under variable costing.

Solutions

Expert Solution

Solution :

The Correct Answer is (B) The net operating income under absorption costing for the year will be $544 higher than net operating income under variable costing.

Working :

Under Absorption Costing, Fixed Manufacturing OH are included in Product Cost while in Variable Costing Fixed Manufacturing OH are charged directly to Income Statement. InAbsorption Costing, Fixed Manufacturing OH included in Ending Inventory will be deffred till they are sold while in variable costing full manufacturing OH $ 6,800 will be charged to Income Statement therefore Income under Variable Costing will less by the Fixed OH included in Ending Inventory.

Fixed Manufacturing OH inluded in Ending Inventory = $ 6,800 / 5,000 * 400 = $ 544

Income under variable costing will be lower by $ 544.as compare to Absorption Costing.

Please vote up and write your doubts in comment section. Would be glad to help you further.


Related Solutions

The company produces a single product. Last year, the company's variable production costs totaled $8,000 and...
The company produces a single product. Last year, the company's variable production costs totaled $8,000 and its fixed manufacturing overhead costs totaled $4,800. The company produced 4,000 units during the year and sold 3,600 units. Assuming no units in the beginning inventory: A. under variable costing, the units in ending inventory will be costed at $3.20 each. B. the net operating income under absorption costing for the year will be $480 lower than net operating income under variable costing. C....
Silver Corporation produces a single product. Last year, the company's variable production costs totaled $7,500 and...
Silver Corporation produces a single product. Last year, the company's variable production costs totaled $7,500 and its fixed manufacturing overhead costs totaled $4,500. The company produced 3,000 units during the year and sold 2,400 units. There were no units in the beginning inventory. Which of the following statements is true? The net operating income under absorption costing for the year will be $900 lower than the net operating income under variable costing. Under absorption costing, the units in ending inventory...
1.A company produces a single product. Variable production costs are $13.1 per unit and variable selling...
1.A company produces a single product. Variable production costs are $13.1 per unit and variable selling and administrative expenses are $4.1 per unit. Fixed manufacturing overhead totals $47,000 and fixed selling and administration expenses total $51,000. Assuming a beginning inventory of zero, production of 5,100 units and sales of 4,150 units, the dollar value of the ending inventory under variable costing would be: 1b. Farron Corporation, which has only one product, has provided the following data concerning its most recent...
A company produces a single product. Last year, fixed manufacturing overhead was $30,000 in total. Variable...
A company produces a single product. Last year, fixed manufacturing overhead was $30,000 in total. Variable production costs were $16 per unit. Fixed selling and administrative costs were $20,000 in total. Variable selling and administrative costs were $4 per unit. There was no beginning inventory. During the year, 3,000 were produced and 2,400 units were sold at a price of $40 per unit. What would be the ending finished goods inventory balance when using absorption costing? $15,600 $9,600 $0 $12,000
ABC Inc. produces a single product and manufactured 20,000 units last year. The company budgeted the...
ABC Inc. produces a single product and manufactured 20,000 units last year. The company budgeted the following overhead costs for the year: Indirect Factory Wages:$100,000Factory Utilities:$ 40,000Factory Depreciation:$ 60,000 Direct manufacturing costs per unit are $50. The company uses an activity-based costing system which compiles costs into 3 cost pools, machining, milling and assembly. The costs allocated to these activity cost pools break down as follows: Usage: Cost:MachiningMillingAssemblyIndirect Factory Wages:50%30%20%Factory Utilities:40%40%20%Factory Depreciation:10%90%0% The following cost drivers are used for each...
The Timbrick Company produces and sells a single product. The production of this product requires 15...
The Timbrick Company produces and sells a single product. The production of this product requires 15 liters of direct material for each unit produced. Timbrick has an inventory policy which sets a target ending inventory of finished goods equal to 15% of next months expected unit sales. The target ending inventory for direct materials is 30% of the materials needed for production for next month. The budgeted cost of direct materials is $0.40 per liter. Normally, Timbrick pays the suppliers...
Pork Soda Inc. produces a single product and sells it for $98.00 a unit. Variable costs...
Pork Soda Inc. produces a single product and sells it for $98.00 a unit. Variable costs are $62.00 per unit and fixed costs are $12,000,000 a. calculate the break even point (number of units) b. calculate the EBIT for sales of 166,667units c. calculate the EBIT for sales of 500,000 units. d. create a break even chart for Pork Soda Inc. Please show work and explain each step please.
A company produces a product that currently costs $8 in variable costs and $2 in fixed...
A company produces a product that currently costs $8 in variable costs and $2 in fixed costs. It sells the product for $14. If processed further, the company will spend an additional $6 in variable costs and $2 in fixed costs. Each unit would then be sold for $24. Why would the company choose to process further?
A company produces a product that currently costs $8 in variable costs and $2 in fixed...
A company produces a product that currently costs $8 in variable costs and $2 in fixed costs. It sells the product for $14. If processed further, the company will spend an additional $6 in variable costs and $2 in fixed costs. Each unit would then be sold for $24. Why would the company choose to process further?
A company makes and sells a single product, the variable cost of the production is $3...
A company makes and sells a single product, the variable cost of the production is $3 per unit and variable cost of selling is $1 per unit, fixed cost totalled $600, and the selling price per unit was $6. The company budgeted to make and sell 3 000 units in the next year. Required Prepare a break even chart showing the expected amount of the output and sales required to break even.
ADVERTISEMENT
ADVERTISEMENT
ADVERTISEMENT