Net Income Is Reported on the Income Statement at $40,000

question 55

Multiple Choice

Net income is reported on the income statement at $40,000. Adjusting entries for accrued revenues of $5,000 and unearned revenue earned during the current period of $2,000 were accidentally omitted. The correct net income is:

• A)$33,000.
• B)$37,000.
• C)$47,000.
• D)$43,000.

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Definitions:

Fixed Manufacturing Overhead

Consists of manufacturing costs that do not change with the level of production, such as salaries of supervisors and rent for factory premises.

Denominator Level

The level of activity used to compute the fixed manufacturing overhead rate in absorption costing, affecting inventory and cost of goods sold.

Budget Variance

The difference between budgeted amounts and actual amounts spent or received.

Volume Variance

The difference between the expected volume of production or sales and the actual volume, affecting budgeting and costing.