Cornell Products
Cornell Products Has the Following Cost Information Available

question 77

Multiple Choice

Cornell Products
Cornell Products has the following cost information available for 2009:
$$\begin{array} { l r } \text { Direct materials } & \$ 1.00 \text { per unit } \\\text { Direct labour } & \$ 2.00 \text { per unit } \\\text { Variable manufacturing overhead } & \$ 1.50 \text { per unit } \\\text { Variable selling and administrative costs } & \$ 50 \text { per unit } \\\text { Fixed manufacturing overhead } & \$ 30000 \\\text { Fixed selling and administrative costs } & \$ 25000\end{array}$$
During 2009, Cornell produced 6000 units out of which 5400 units were sold for $20 each.
-What is net income under absorption costing?

• A) $23 000
• B) $29 000
• C) $26 000
• D) $35 000

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Definitions:

Specific Identification

An inventory valuation method where each item in inventory is matched with a specific cost.

Inventory Costing

Inventory costing is the method used to assign costs to inventory items, determining the cost of goods sold and remaining inventory value.

Average Cost Formula

A method for determining the cost of inventory by dividing the total cost of goods available for sale by the total number of units available for sale.

Ending Inventory

The total value of goods available for sale at the end of an accounting period, after accounting for sales and purchases during the period.