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

question 36

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 an absorption costing system that assigns $11 of direct labor cost and $62 of fixed manufacturing overhead to each unit that is produced.Which of the following statements is true regarding the net operating income in the first year?

• A) Super-variable costing net operating income exceeds absorption costing net operating income by $146,000.
• B) Absorption costing net operating income exceeds super-variable costing net operating income by $124,000.
• C) Super-variable costing net operating income exceeds absorption costing net operating income by $124,000.
• D) Absorption costing net operating income exceeds super-variable costing net operating income by $146,000.

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Definitions:

Employment Relationship

The legal and practical connection between an employer and employee, defining rights, responsibilities, and conditions of work.

Repetitive Tasks

Simple or complex activities performed repeatedly by an individual, often associated with manual or clerical jobs, which can lead to monotony and potential health issues.

Mainstream Economics

a body of economic thought and theories that are widely accepted and practiced by economists, focusing on market structures, economic efficiency, and the role of government.

Economic Efficiency

The optimal allocation of resources where output is maximized for a given set of inputs, or the input cost is minimized for a certain level of output.