Affinity Makes a Single Product, Pool Pumps Under Which Method Will Net Income Be Larger?
A) Variable

question 8

Multiple Choice

Affinity makes a single product, pool pumps. Information for 2014 appears below (Assume the same unit costs in all years) : $$\begin{array} { l r } \text { Sales in units } & 5,800 \\\text { Production in units } & 6,200 \\\text { Beginning inventory } & 1,500 \\\text { Variable production cost per unit } & \$ 46.00 \\\text { Variable selling cost per unit } & \$ 6.00 \\\text { Fixed production cost per year } & \$ 31,000 \\\text { Fixed selling and administrative cost per year } & \$ 24,000 \\\text { Selling price per unit } & \$ 75.00\end{array}$$ Under which method will net income be larger?

• A) Variable costing
• B) Full costing
• C) Net income under both the variable and full costing methods will be the same.
• D) The answer cannot be determined from the information provided.

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Definitions:

Domestic Firm

A company that operates primarily within the borders of its home country and caters to the local market.

Overseas Markets

Overseas Markets denote the markets located outside the country of origin where goods, services, and investments are traded.

Existing Capabilities

The current skills, technologies, processes, and resources that an organization possesses.

PEST Analysis

A strategic management tool used to evaluate the Political, Economic, Social, and Technological external factors affecting an entity.