Last Year, Harris Company Manufactured 17,000 Units and Sold 13,000

question 87

Multiple Choice

Last year, Harris Company manufactured 17,000 units and sold 13,000 units. Production costs for the year were as follows:
$\begin{array} { | l | r | } \hline \text { Direct materials } & \$ 153,000 \\\hline \text { Direct labour } & 110,500 \\\hline \text { Variable manufacturing overhead } & 204,000 \\\hline \text { Fixed manufacturing overhead } & 255,000 \\\hline\end{array}$ Sales were $780,000 for the year, variable selling and administrative expenses were $88,400, and fixed selling and administrative expenses were $170,000. There was no beginning inventory. Assume that direct labour is a variable cost.


-Under variable costing,what was the company's operating income for the year,as compared with under absorption costing?

• A) $60,000 higher than under absorption costing.
• B) $108,000 higher than under absorption costing.
• C) $108,000 lower than under absorption costing.
• D) $60,000 lower than under absorption costing.

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Definitions:

Return On Assets

A profitability ratio that indicates how efficiently a company uses its assets to produce profit, calculated by dividing net income by total assets.

Net Profit Margin

A financial performance metric that shows the percentage of sales that has turned into profits, calculated by dividing net profit by revenue.

Price/Earnings Ratio

A valuation ratio of a company's current share price compared to its per-share earnings, used to evaluate a company's financial health and growth prospects.