Panda, Which Began Business at the Start of 2012, Had

question 16

Multiple Choice

Panda, which began business at the start of 2012, had the following data: Planned and actual production: 100,000 units
Sales: 80,000 units at $20 per unit
Production costs: Variable $6 per unit; Fixed $300,000
Selling and administrative costs: Variable $1 per unit; Fixed $32,000
The gross margin that Panda Company would disclose on its 2012 absorption-costing income statement is:

• A)$0.
• B)$700,000.
• C)$880,000.
• D)$1,300,000.
• E)$1,600,000.

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Definitions:

Total Fixed Cost

The sum of all costs that remain constant regardless of the level of production or business activity.

Fixed Costs

Expenses that do not change in proportion to the activity of a business, such as rent, salaries, and insurance.

Activity Changes

Adjustments or variations in the level of a company's activities, such as production volume or sales, that can impact its costs and operational efficiency.

Straight-Line Depreciation

A method for distributing the cost of a solid asset in even annual payments throughout its effective life.