Freetown Corporation Incurred Fixed Manufacturing Costs of $34,000 During 2017

question 44

Multiple Choice

Freetown Corporation incurred fixed manufacturing costs of $34,000 during 2017. Other information for 2017 includes:
The budgeted denominator level is 2,000 units.
Units produced total 1,800 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.
Operating income using absorption costing will be ________ than operating income if using variable costing. (Round any intermediary calculations to the nearest cent and your final answer to the nearest dollar.)

• A) $11,900 higher
• B) $9,444 lower
• C) $8,500 higher
• D) $22,100 lower

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Definitions:

Market Power

The ability of a firm or group of firms to influence the price or control the supply of a product or service in the market.

Herfindahl Index

A measure of market concentration used to evaluate the level of competition within an industry, calculated by summing the squares of each firm's market share.

Four-Firm Concentration Ratio

A metric that measures the total market share possessed by the four largest firms within a specific industry.

Antitrust Laws

Legislation enacted by governments to prevent unfair competition, monopolies, and other practices that could detrimentally impact market health and consumer choice.