Caterlebe Productions Uses a Standard Costing System Calculate the Standard Net Operating Income

question 61

Essay

Caterlebe Productions uses a standard costing system. At the end of 2015, the following details are found in their books.
Sales Revenues: $750,000
Cost of Goods Sold (standard costing): $400,500
Marketing & Admin expenses: $150,000
Variances:
$$\begin{array} { | l | r | l | } \hline \text { Sales Revenue } & \$ 6,000 & \text { F } \\\hline \text { Direct Materials Cost Variance } & 400 & \text { U } \\\hline \text { Direct Materials Efficiency Variance } & 375 & \text { F } \\\hline \text { Direct Labor Cost Variance } & 675 & \text { U } \\\hline \text { Direct Labor Efficiency Variance } & 150 & \text { F } \\\hline \text { Variable Overhead Cost Variance } & 250 & \text { U } \\\hline \text { Variable Overhead Efficiency Variance } & 800 & \text { F } \\\hline \text { Fixed Overhead Cost Variance } & 420 & \text { U } \\\hline \text { Fixed Overhead Volume Variance } & 100 & \text { F } \\\hline\end{array}$$ Calculate the standard net operating income.

Understand the concept of incremental cost approach in capital budgeting.

Recognize the importance of post-audit in capital budgeting and how it can provide feedback on the investment's performance.

Understand the effect of tax implications on cash flows from capital investments.

Understand the concepts of payback method and time value of money in capital budgeting decisions.

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Definitions:

Cognitive Development

The process of growth and change in intellectual/mental abilities such as thinking, reasoning, and understanding over the course of a person's life.

Sensorimotor

Pertaining to or involving both sensory and motor activities or functions, often in reference to the integration of sensory input and motor responses.

Motor Cortex

A part of the cerebral cortex tasked with planning, managing, and executing movements done by choice.

Inferior Frontal Cortex

A region of the frontal lobe of the brain that plays a role in language processing and motor control.