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Joe's Tires,Inc The Operating Income Calculated Using Variable Costing and Absorption Costing

question 190

Multiple Choice

Joe's Tires,Inc.reports the following information for the year ended December 31: $\begin{array} { | l | r | } \hline \text { Units sold } & { 590 \text { units } } \\\hline \text { Sales price } & \$ 200 \text { per unit } \\\hline \text { Direct materials } & \$ 27 \text { per unit } \\\hline \text { Direct labor } & \$ 9 \text { per unit } \\\hline \text { Variable manufacturing overhead } & \$ 16 \text { per unit } \\\hline \text { Fixed manufacturing overhead } & \$ 30 \text { per unit } \\\hline \text { Variable selling and administrative costs } & \$ 5 \text { per unit } \\\hline \text { Fixed selling and administrative costs } & \$ 12,500 \text { per year } \\\hline\end{array}$ The operating income calculated using variable costing and absorption costing amounted to $9,200 and $11,900,respectively.There were no beginning inventories.Determine the total fixed manufacturing overhead that will be expensed under absorption costing for the year.

Assess the impact of variances on performance evaluation systems.

Understand the treatment of year-end balances in variance accounts.

Recognize the role of engineers and other professionals in setting standard costs.

Analyze the impact of labor rates and efficiency on production cost variances.

Definitions:

Strategies

Long-term plans of action designed to achieve a particular goal or set of objectives, particularly in the context of business, military, or political operations.

Delivery Reliability

The ability of a company to deliver products or services to customers within the promised time frame consistently.

Promised Time

A specified duration or a moment in the future at which certain events are foretold or expected to happen.

Differentiation

A strategy businesses use to distinguish their products or services from those of competitors, often through unique features or superior quality.