Pennington Products
Pennington Products Has Two Product Lines: R-100 and R-200

question 83

Multiple Choice

Pennington Products
Pennington Products has two product lines: R-100 and R-200. Revenue and cost information for each of the product lines are as follows:
$\begin{array}{lrr}&\underline{\text { R-100 }}&\underline{\text { R-200 }}\\\text { Selling price per unit } & \$ 45 & \$ 60 \\\text { Variable costs per unit } & 15 & 24 \\\text { Traceable fixed expenses } & \$ 250000 & \$ 360000\end{array}$

Pennington has common fixed expenses of $250 000 per year. Last year, the company produced and sold 30 000 units of R-100 and 20 000 units of R-200.
-What is the company's overall net income?

• A) $1 260 000
• B) $ 510 000
• C) $1 010 000
• D) $ 760 000

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Definitions:

Bad Debt Expense

An expense recorded when receivables are determined to be uncollectible, impacting the income statement.

Allowance Method

An accounting technique that estimates and sets aside a portion of accounts receivable deemed likely uncollectible.

Uncollectible Receivables

Accounts receivable that the company does not expect to collect, often recognized as bad debt expense.

Settlement

The process of finalizing a transaction where the buyer pays the seller, and the seller transfers ownership of an asset, or the resolution of a dispute.