DeAnne Company's Variable Costing Income Statement for August Appears Below

question 109

Multiple Choice

DeAnne Company's variable costing income statement for August appears below:

DeAnne Company
Income Statement
For the month ended August 31
$\begin{array}{|l|l|l|}\hline \text { Sales }(\$ 15 \text { per unit) } & & \$ 600,000 \\\hline \text { Less: Variable costs } & & \\\hline \text { Variable cost of goods } & & \\\text { sold: } & &\\\text { Beginning inventory } & \$ 72,000 \\\hline \begin{array}{l}\text { Add: Variable cost of goods } \\\text { manufactured }\end{array} & \underline{315,000} \\\hline \text { Goods available for sale } & \$ 387,000 \\\hline \text { Less: Ending inventory } & \underline{27,000} \\\hline \text { Variable cost of goods sold } & \$ 360,000 \\\hline \text { Variable selling expense } & \underline{80,000} \\\hline\text { Total variable costs } & & \underline{\$ 440,000} \\\hline \text { Contribution margin } & & 160,000 \\\hline \text { Fixed costs: } & & \\\hline \text { Fixed manufacturing } & \$ 105,000 &\\ \text { overhead }\\\hline \begin{array}{l}\text { Fixed selling and } \\\text { administrative }\end{array} & \underline{35,000} & \\\hline \text { Total fixed costs } & & \$ 140,000 \\\hline \text { Operating income } & & \$ 20,000\\\hline\end{array}$ The company produces 35,000 units each month. Variable production costs per unit and total fixed costs have remained constant over the past several months.

-Under absorption costing,what operating income (loss) did the company report for the month ending August 31?

• A) ($5,000).
• B) $5,000.
• C) $20,000.
• D) $25,000.

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Definitions:

Responsibility

The obligation to perform duties or tasks correctly and being accountable for the outcomes.

Stable Workforce

A stable workforce refers to a work environment where the number of employees and their job roles remain constant over time, minimizing turnover and fostering consistent productivity and organizational knowledge.

Higher Wages

Increased compensation paid to workers, usually as a result of economic policies, bargaining agreements, or market conditions, leading to improved living standards.

Follow Demand

A strategy where production levels are adjusted in response to changes in market demand.