Petra, Inc What Is the Operating Income Using Absorption Costing? (Round Any

question 26

Multiple Choice

Petra, Inc. has collected the following data. (There are no beginning inventories.) : $$\begin{array} { | l | r | l | } \hline \text { Units produced } & 480 & \text { units } \\\hline \text { Units sold } & 480 & \text { units } \\\hline \text { Sales price } & \$ 210 & \text { per unit } \\\hline \text { Direct materials } & \$ 40 & \text { per unit } \\\hline \text { Direct labor } & \$ 35 & \text { per unit } \\\hline \text { Variable manufacturing overhead } & \$ 30 & \text { per unit } \\\hline \text { Fixed manufacturing overhead } & \$ 11,000 & \text { per year } \\\hline \text { Variable selling and administrative costs } & \$ 10 & \text { per unit } \\\hline \text { Fixed selling and administrative costs } & \$ 10,000 & \text { per year } \\\hline\end{array}$$ What is the operating income using absorption costing? (Round any intermediate calculations to the nearest cent, and your final answer to the nearest dollar.)

• A) $39,400
• B) $34,600
• C) $24,600
• D) $29,400

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Definitions:

Corporation's Liabilities

The financial obligations or debts for which a corporation is legally responsible.

Liability Limitation

A clause in a contract that restricts the amount of compensation that can be claimed for breaches of the contract or other liabilities.

Cash Assets

Liquid funds or assets readily convertible into cash without significant loss in value.

Preferred Shares

Type of stock that grants holders priority for dividends over common stockholders and rights to assets in the event of liquidation.