Zintec Has Fixed Manufacturing Costs of $400,000 and Produces 10,000

question 55

Multiple Choice

Zintec has fixed manufacturing costs of $400,000 and produces 10,000 and sells 8,000 wagons during the year.There is no beginning inventory.Which of the following conclusions can be drawn?

• A)Variable costing income will be $80,000 higher than full costing income.
• B)Full costing income will be $80,000 higher than variable costing income.
• C)Variable and full costing income will be the same.
• D)There is not enough information to draw a conclusion.

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Definitions:

Standard Maintenance Cost

The anticipated cost of regular upkeep and maintenance of equipment or property, based on historical data or industry standards.

Machine-Hours

A measure of the amount of time machines are used in the production process, often used as an allocation base for assigning overhead costs.

Variable Overhead Rate Variance

The difference between the actual variable overhead incurred and the expected variable overhead based on the predetermined overhead rate and actual activity level.

Standard Machine-Hours

A predetermined measure of the amount of machine time required to produce a unit of product under normal operating conditions.