Freetown Corporation Incurred Fixed Manufacturing Costs of $26,000 During 2017

question 163

Multiple Choice

Freetown Corporation incurred fixed manufacturing costs of $26,000 during 2017. Other information for 2017 includes:
The budgeted denominator level is 2,800 units.
Units produced total 1,500 units.
Units sold total 1,300 units.
Beginning inventory was zero.
The company uses absorption costing and the fixed manufacturing cost rate is based on the budgeted denominator level. Manufacturing variances are closed to cost of goods sold.
Fixed manufacturing costs expensed on the income statement (excluding adjustments for variances) total ________. (Round any intermediary calculations to the nearest cent and your final answer to the nearest dollar.)

• A) $12,077
• B) $22,533
• C) $26,000
• D) $0

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Definitions:

Fixed Costs

Costs that do not vary with the level of production or sales, such as rent or salaries, providing predictability for budgeting.

Responsibility Accounting

A system of accounting that segments financial information by areas of responsibility, allowing managers to be held accountable for their areas' financial performance.

Not-for-Profit Entities

Organizations that operate for purposes other than making a profit, often focusing on social, educational, or charitable endeavors.

Net Income

The total profit of a company after all expenses and taxes have been subtracted from total revenues.