The Pacific Company Manufactures a Single Product During the Year, 5,000 Units Were Produced and 4,800 Units

question 94

Multiple Choice

The Pacific Company manufactures a single product. The following data relate to the year just completed:
$\begin{array}{|l|r|}\hline \text { Variable costs per unit: } & \\\hline \text { Production } &\$ 43 \\\hline \text { Selling and administrative } & \$ 15 \\\hline \text { Fixed costs in total: } & \\\hline \text { Production } &\$ 145,000 \\\hline \text { Selling and administrative } &\$ 95,000 \\\hline\end{array}$
During the year, 5,000 units were produced and 4,800 units were sold. There were no beginning inventories.

-Which of the following would best describe the relationship between the carrying value of the finished goods inventory at the end of the year under variable costing as opposed to under absorption costing?

• A) $8,800 less than under absorption costing.
• B) The same as absorption costing.
• C) $5,800 less than under absorption costing.
• D) $5,800 more than under absorption costing

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Definitions:

Equivalent Ratio

A ratio that has the same value when compared to another ratio, despite possibly having different terms.

Ratio

A relationship between two quantities expressed as the quotient of one divided by the other.

Equivalent Ratio

A way to express the same relationship or proportion between two quantities, although the numbers involved may differ.

Equivalent Ratio

A proportional relationship between two quantities showing how many times one value contains or is contained within the other.