Krepps Corporation Produces a Single Product

question 206

Multiple Choice

Krepps Corporation produces a single product. Last year, Krepps manufactured 28,000 units and sold 22,500 units. Production costs for the year were as follows: Sales totaled $1,046,250 for the year, variable selling and administrative expenses totaled $117,000, and fixed selling and administrative expenses totaled $201,600. There was no beginning inventory. Assume that direct labor is a variable cost.Under variable costing, the company's net operating income for the year would be:

• A) $33,000 lower than under absorption costing.
• B) $33,000 higher than under absorption costing.
• C) $66,000 lower than under absorption costing.
• D) $66,000 higher than under absorption costing.

Calculate the total manufacturing costs incurred during a period.

Calculate the cost of goods manufactured based on given inventory and cost data.

Interpret the role of beginning and ending inventories in the calculation of cost of goods sold and cost of goods manufactured.

Understand the classification of costs as either inventoriable or period costs and their impact on financial statements.

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Definitions:

Affective

Relating to moods, feelings, and attitudes; the emotional aspect of the mind's function.

Attitude

A settled way of thinking or feeling about someone or something, typically reflected in a person's behavior.

Physiological

Related to the normal functions of living organisms and their parts, including all physical and chemical processes.

Evolutionary

Pertaining to the process of natural selection and adaptation where species undergo genetic change over time, resulting in new characteristics that can enhance survival and reproduction.