Locklear,Inc The Operating Income Calculated Using Variable Costing and Absorption Costing

question 120

Multiple Choice

Locklear,Inc.reports the following information for the year ended December 31: $$\begin{array} { | l | r | l | } \hline \text { Units sold } & 620 & \text { units } \\\hline \text { Sales price } & \$ 130 & \text { per unit } \\\hline \text { Direct materials } & \$ 28 & \text { per unit } \\\hline \text { Direct labor } & \$ 8 & \text { per unit } \\\hline \text { Variable manufacturing overhead } & \$ 13 & \text { per unit } \\\hline \text { Fixed manufacturing overhead } & \$ 12 & \text { per unit } \\\hline \text { Variable selling and administrative costs } & \$ 6 & \text { per unit } \\\hline \text { Fixed selling and administrative costs } & \$ 12,600 & \text { per year } \\\hline\end{array}$$ The operating income calculated using variable costing and absorption costing amounted to $10,000 and $12,700,respectively.There were no beginning inventories.Determine the total fixed manufacturing overhead that will be expensed under absorption costing for the year.

• A)$10,140
• B)$7440
• C)$24,800
• D)$30,380

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Definitions:

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