Focus Picture Company Sold 5,600 Units and Produced 6,000 Units

question 30

Multiple Choice

Focus Picture Company sold 5,600 units and produced 6,000 units this past year. Unit variable costs were £15 (including variable selling costs of £3) , and total fixed manufacturing costs totaled £16,500. Which costing system (variable or absorption) will show a higher net income and by how much?

• A)absorption costing, £1,100
• B)variable costing, £1,100
• C)absorption costing £17,600
• D)This cannot be determined from the information given.

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Definitions:

Discharge

Completion or termination of an obligation, such as paying off a debt or being released from a contractual duty.

Bankruptcy Proceeding

A legal process in which individuals or entities who cannot pay their debts seek relief through the court system.

Chapter 11

A provision of the United States Bankruptcy Code that allows businesses to reorganize and restructure their debts.

Debtor Corporation

A business entity that owes money to creditors.