Krepps Corporation Produces a Single Product

question 14

Multiple Choice

Krepps Corporation produces a single product. Last year, Krepps manufactured 20,000 units and sold 15,000 units. Production costs for the year were as follows: Sales totaled $825,000 for the year, variable selling and administrative expenses totaled $108,000, and fixed selling and administrative expenses totaled $165,000. There was no beginning inventory. Assume that direct labor is a variable cost.
Under variable costing, the company's net operating income for the year would be:

• A) $101,250 lower than under absorption costing.
• B) $60,000 lower than under absorption costing.
• C) $101,250 higher than under absorption costing.
• D) $60,000 higher than under absorption costing.

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Definitions:

Sales Staff

Professionals tasked with selling a company's products or services to customers.

Sales Quota

Specific goals assigned to a salesperson, sales team, branch sales office, or sales district for a stated time period.

Sales Goals

Specific objectives set by a business regarding the amount of product or services to be sold within a certain timeframe, aiming for growth or stability.

Commission Compensation Plan

A payment model where employees or sales agents are rewarded based on the sales or performance they achieve.