A Company Reports the Following Information for Its First Year

question 87

Multiple Choice

A company reports the following information for its first year of operations: $\begin{array}{ll}\text { Units produced this year } & ? \text { units } \\\text { Units sold this year } & 1,500 \text { units } \\\text { Direct materials } & \$ 9 \text { per unit } \\\text { Direct labor } & \$ 5 \text { per unit } \\\text { Variable overhead } & \$ 7 \text { per unit } \\\text { Fixed overhead } & \$ 24,000 \text { in total }\end{array}$ If the company's cost per unit of finished goods using absorption costing is $27, how many units were produced?

• A)4,000 units.
• B)3,600 units.
• C)1,846 units.
• D)2,667 units.
• E)2,000 units.

Understand the concept and application of common-sized financial statements.

Grasp the principles and calculation methods for horizontal analysis.

Comprehend vertical analysis and its application in evaluating financial statements.

Appreciate the significance of ratio analysis in assessing a company's liquidity, solvency, and profitability.

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Definitions:

Accounts Receivable

Amounts owed to a business by its customers from sales or services rendered on credit that are expected to be collected in cash.

Notes Receivable

Financial assets representing amounts owed to the holder by individuals or entities, usually evidenced by formal instruments of credit.

Accounting Issues

Challenges or problems encountered in the preparation, auditing, or analysis of financial statements.

Notes Receivable

A financial asset representing amounts owed to the company by others, documented by formal agreements with repayment dates and interest.