A Business Operated at 100% of Capacity During Its First

question 123

Multiple Choice

A business operated at 100% of capacity during its first month and incurred the following costs: If 500 units remain unsold at the end of the month, what is the amount of inventory that would be reported on the variable costing balance sheet?

• A) $41,500
• B) $36,000
• C) $42,800
• D) $38,500

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Definitions:

Incremental Costs

Costs that change depending on the level of production or an alternative course of action.

Additional Revenues

Extra income generated from sources outside of the company's main business operations.

Sunk Cost

Costs that have already been incurred and cannot be recovered or reversed.

Incremental Overhead Costs

Additional overhead expenses directly resulting from a specific business decision or activity.