Gage Company Reports the Following Information for Its First Year

question 26

Multiple Choice

Gage Company reports the following information for its first year of operations: $\begin{array}{ll}\text { Units produced this year } & 7,000 \text { units } \\\text { Units sold this year } & 6,500 \text { units } \\\text { Direct materials } & \$ 22 \text { per unit } \\\text { Direct labor } & \$ 30 \text { per unit } \\\text { Variable overhead } & ? \text { in total } \\\text { Fixed overhead } & \$ 56,000 \text { in total }\end{array}$ If the company's cost per unit of finished goods using variable costing is $63, what is total variable overhead?

• A)$21,000
• B)$71,500
• C)$77,000
• D)$19,500
• E)$16,590

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Definitions:

Factory Overhead

All indirect costs related to manufacturing, excluding direct labor and direct materials, required to operate the factory.

Product Cost

The total expense incurred to produce and deliver a product to the market, including materials, labor, and overhead costs.

Radio Commercial

An advertisement that is broadcasted on the radio to promote goods, services, or ideas to a wide audience.

Selling Expense

Costs incurred directly and indirectly in making sales, including advertising, sales staff salaries, and commissions, but not the cost of goods sold.