Oxygen,Inc Assume That the Production Costs and Sales Prices Were the |

question 198

Multiple Choice

Oxygen,Inc.reports the following information: $$\begin{array} { | l | r | } \hline \text { Units produced } & 2,500 \text { units } \\\hline \text { Units sold } & 2,000 \text { units } \\\hline \text { Sales price } & \$ 200 \text { per unit } \\\hline \text { Direct materials } & \$ 40 \text { per unit } \\\hline \text { Direct labor } & \$ 25 \text { per unit } \\\hline \text { Variable manufacturing overhead } & \$ 20 \text { per unit } \\\hline \text { Fixed manufacturing overhead } & \$ 90,000 \text { per year } \\\hline \text { Variable selling and administrative costs } & \$ 15 \text { per unit } \\\hline \text { Fixed selling and administrative costs } & \$ 75,000 \text { per year } \\\hline\end{array}$$ Assume that the production costs and sales prices were the same in the previous year.Assume no beginning inventories.
Requirements:

• A)Calculate unit product cost using absorption costing and variable costing.
• B)Calculate the operating income using absorption costing and variable costing.

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Definitions:

On Approval

A conditional agreement for the sale of goods where the buyer is not obligated to complete the purchase unless they approve of the goods.

Risk of Loss

The responsibility for damage or loss of goods during a transaction or while in transit.

Inspected

Examination or review of a condition or situation, often for compliance or quality control.

Delivery

The act of transferring possession of a good or document from one party to another, fulfilling a contractual obligation.