Barrett,Inc The Beginning Finished Goods Inventory Costs Were $3500 Under Absorption

question 202

Multiple Choice

Barrett,Inc.reports the following information for the year ended December 31: $$\begin{array} { | l | r | c | } \hline \text { Beginning Finished Goods Inventory } & 50 & \text { units } \\\hline \text { Units produced } & 410 & \text { units } \\\hline \text { Units sold } & 460 & \text { units } \\\hline \text { Sales price } & \$ 150 & \text { per unit } \\\hline \text { Direct materials } & \$ 30 & \text { per unit } \\\hline \text { Direct labor } & \$ 10 & \text { per unit } \\\hline \text { Variable manufacturing overhead } & \$ 16 & \text { per unit } \\\hline \text { Fixed manufacturing overhead } & \$ 15,300 & \text { per year } \\\hline \text { Variable selling and administrative costs } & \$ 10 & \text { per unit } \\\hline \text { Fixed selling and administrative costs } & \$ 13,500 & \text { per year } \\\hline\end{array}$$ The beginning Finished Goods Inventory costs were $3500 under absorption costing and $2800 under variable costing.
What is the operating income using variable costing?

• A) $38,640
• B) $40,200
• C) $9840
• D) $2340

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Definitions:

Market Price

The current price at which a good or service can be bought or sold in a marketplace, determined by supply and demand.

Cartel

A formal agreement among competing firms to control prices or exclude entry of a new competitor in the market.

Market Price

The current price at which an asset or service can be bought or sold in a particular market.

Substitutes

Products or services that can be used in place of each other, having a positive cross-price elasticity of demand.