Crenshaw Company Produces a Part That Is Used in the Manufacture

question 72

Multiple Choice

Crenshaw Company produces a part that is used in the manufacture of one of its products. The costs associated with the production of 5,000 units of this part are as follows: $$\begin{array} { l l } \text { Direct materials } & \$ 108,000 \\\text { Direct labor } & 156,000 \\\text { Variable factory overhead } & 72,000 \\\text { Fixed factory overhead } & \underline { 168,000 } \\\text { Total costs } & \underline { \$ 504,000 }\end{array}$$ Of the fixed factory overhead costs, $72,000 is avoidable. Assuming no other use of their facilities, the highest price that Crenshaw Company should be willing to pay for 5,000 units of the part is:

• A) $432,000
• B) $288,000
• C) $504,000
• D) $336,000

Understand the classification of accounts including their normal balances.

Identify the financial statements on which different accounts are reported.

Distinguish between permanent and temporary accounts.

Recognize the expense recognition principle for natural resources.