Garcia Company Has No Beginning and Ending Inventories,and Reports the Following

question 71

Multiple Choice

Garcia Company has no beginning and ending inventories,and reports the following data about its only product:
$\begin{array}{ll}\text { Direct materials used } & \$ 270,000 \\\text { Direct labor } & \$ 180,000 \\\text { Fixed indirect manufacturing } & \$ 130,000 \\\text { Fixed selling and administrative } & \$ 150,000\\\text { Variable indirect manufacturing }&\$120,000\\\text { Variable selling and administrative }&\$60,000\\\text { Selling price(per unit) }&\$99\end{array}$
$\begin{array} { l } \text {Units produced and sold }&30,000 \\\end{array}$

Garcia Company uses the absorption approach to prepare the income statement.What is the operating income?

• A) $2,060,000
• B) $2,120,000
• C) $2,240,000
• D) $2,970,000

Know how to convert income from variable costing to absorption costing and vice versa.

Identify the role of fixed and variable costs in product pricing and short-term decision making.

Understand the utility of financial ratios in assessing a borrower's default risk and a company's performance.

Grasp the concept and application of different types of financial analyses such as benchmark comparison, time-series, and cross-sectional analyses.

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Definitions:

Blind Spot

A location in the visual field that corresponds to the lack of light-detecting photoreceptor cells on the optic disc of the retina, leading to a gap in the field of vision.

Reflected Light

Light that bounces off an object's surface, which can be perceived and analyzed to determine the object's properties.

Visual Spectrum

the range of wavelengths of electromagnetic radiation visible to the human eye, generally considered to be between 400 and 700 nanometers.

Electromagnetic Spectrum

The range of all types of electromagnetic radiation, which includes, among others, radio waves, microwaves, infrared, visible light, ultraviolet, X-rays, and gamma rays.