Khanam Company, Which Has Only One Product, Has Provided the Following

question 68

Multiple Choice

Khanam Company, which has only one product, has provided the following data concerning its most recent month of operations:
$\begin{array}{|l|r|}\hline \text { Selling price } & \$ 97 \\\hline \text { Units in beginning inventory } & 500 \\\hline \text { Units produced } & 8,400 \\\hline \text { Units in ending inventory } & 400 \\\hline \text { Variable costs per unit: } & \\\hline \text { Direct materials } & \$ 20 \\\hline \text { Direct labour } & \$ 37 \\\hline \text { Variable manufacturing overhead } & \$ 1 \\\hline \text { Variable selling and administrative } & \$ 11 \\\hline \text { Fixed costs: } & \\\hline \text { Fixed manufacturing overhead } & \$ 67,200 \\\hline \text { Fixed selling and administrative } & \$ 161,500 \\\hline\end{array}$ The company produces the same number of units every month, although the sales in units vary from month to month. The company's variable costs per unit and total fixed costs have been constant from month to month.


-What is the amount of fixed overhead deferred under absorption costing?

• A) $0
• B) $3,200
• C) $4,000
• D) $67,200

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Definitions:

Closing Journal Entries

Entries made at the end of an accounting period to transfer balances from temporary to permanent accounts.

Revenue Journal

An accounting ledger that records all transactions involving the income earned by the business, specifically from its operations and activities.

Provided on Account

A transaction that occurs when goods or services are delivered with the understanding that payment will be made at a later date.

Creditor Balances

The amounts owed by a business to its creditors, representing liabilities for goods, services, or loans provided to the business.