Use This Information for Timmer Corporation to Answer the Questions

question 84

Multiple Choice

Use this information for Timmer Corporation to answer the questions that follow.

Timmer Corporation just started business in January. There were no beginning inventories. During the year, it manufactured 12,000 units of product and sold 10,000 units. The selling price of each unit was $20. Variable manufacturing costs were $4 per unit, and variable selling and administrative costs were $2 per unit. Fixed manufacturing costs were $24,000, and fixed selling and administrative costs were $6,000.

-What would Timmer's net income be for the year using variable costing?

• A) $114,000
• B) $110,000
• C) $4,000
• D) $106,000

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Definitions:

Financial Leverage

The use of borrowed funds to increase the potential return on an investment.

Shareholder Leverage

The use of borrowed funds by shareholders to increase their potential returns from an investment.

Operating Leverage

A measure of how revenue growth translates into growth in operating income due to fixed costs in a company's business model.

Tax Rate

The percentage at which an individual or corporation is taxed by the government on their income or profits.