During the Past Year, Carr Company Manufactured 25,000 Units and Sold

question 32

Multiple Choice

During the past year, Carr Company manufactured 25,000 units and sold 20,000 units. Production costs for the year were as follows:
$\begin{array} { | l | r | } \hline \text { Direct materials } & \$ 180,000 \\\hline \text { Direct labour } & 120,000 \\\hline \text { Variable manufacturing overhead } & 210,000 \\\hline \text { Fixed manufacturing overhead } & 250,000 \\\hline\end{array}$ Total sales were $850,000, total variable selling expenses were $110,000, and total fixed selling and administrative expenses were $170,000. There were no units in beginning inventory. Assume that direct labour is a variable cost. Do not round intermediate calculations.

-What was the operating income for the year under variable costing as opposed to absorption costing?

• A) $28,000 lower than under absorption costing.
• B) $28,000 higher than under absorption costing.
• C) $50,000 lower than under absorption costing.
• D) $50,000 higher than under absorption costing.

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Definitions:

Term

In finance, refers to the length of time until a financial contract expires. In other contexts, it can mean a specific period or duration.

Secondary Capital Market

The financial market where investors buy and sell securities they already own, as opposed to the primary market where securities are issued for the first time.

10-Year Bond

A long-term debt security issued by governments or corporations with a maturity of ten years.

Transaction

The act of conducting a trade or business deal involving the exchange of goods, services, or financial assets.