(Appendix 6A) Letcher Corporation Manufactures and Sells One Product

question 41

Multiple Choice

(Appendix 6A) Letcher Corporation manufactures and sells one product. The following information pertains to the company's first year of operations:
The company does not have any variable manufacturing overhead costs or variable selling and administrative expenses. During its first year of operations, the company produced 56,000 units and sold 54,000 units. The company's only product is sold for $227 per unit.
-The company is considering using either super-variable costing or a variable costing system that assigns $11 of direct labor cost to each unit that is produced.Which of the following statements is true regarding the net operating income in the first year?

• A) Variable costing net operating income exceeds super-variable costing net operating income by $124,000.
• B) Super-variable costing net operating income exceeds variable costing net operating income by $124,000.
• C) Variable costing net operating income exceeds super-variable costing net operating income by $22,000.
• D) Super-variable costing net operating income exceeds variable costing net operating income by $22,000.

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Definitions:

Production Quantities

The amount of product that is produced within a specific period.

Microbusiness

A small business typically defined by having fewer than 10 employees and operating on a very small scale.

Diversity

The inclusion and representation of different groups of people, such as races, cultures, ages, and genders, within a community or organization.

Economies Of Scale

Refers to the cost advantage that arises with increased output of a product, where the per-unit cost decreases as the production scale becomes larger.