Red River Company Sells Its Product for $12,000 Per Unit

question 95

Multiple Choice

Red River Company sells its product for $12,000 per unit. Variable costs per unit are: Manufacturing overhead -$8,000
Selling and administrative -$150
Fixed costs are:
Manufacturing overhead -$30,000
Selling and administrative -$40,000
Red River had no beginning inventory at January 1, 2010. Production was 20 units each year in 2010, 2011, and 2012. Sales were 20 units in 2010, 16 units in 2011, and 24 units in 2012.
For the three years from 2010 to 2012 inclusive:

• A)absorption costing income exceeds variable costing income by $6,000.
• B)absorption costing income equals variable costing income.
• C)variable costing income exceeds absorption costing income by $6,000.
• D)variable costing income is less than absorption costing by $2,400.
• E)absorption costing income may be greater than, equal to, or less than variable costing income depending on the situation.

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Definitions:

Inventory

The goods or materials a business holds for the ultimate goal of resale or production.

Aggregate Planner

A tool or process used to determine the optimum levels of production, inventory, and workforce required to meet forecasted demand while minimizing costs.

Basic Strategies

Fundamental approaches or methods applied in planning and decision-making to achieve desired business outcomes or objectives.

Aggregate Planning

A marketing activity aimed at balancing supply and demand by determining the optimal level of production, workforce, inventory, and backorder levels over a medium-term horizon.