Barrett,Inc The Beginning Finished Goods Inventory Costs Were $3500 Under Absorption

question 103

Multiple Choice

Barrett,Inc.reports the following information for the year ended December 31: $$\begin{array} { | l | r | c | } \hline \text { Beginning Finished Goods Inventory } & 50 & \text { units } \\\hline \text { Units produced } & 410 & \text { units } \\\hline \text { Units sold } & 460 & \text { units } \\\hline \text { Sales price } & \$ 150 & \text { per unit } \\\hline \text { Direct materials } & \$ 30 & \text { per unit } \\\hline \text { Direct labor } & \$ 10 & \text { per unit } \\\hline \text { Fariable manufacturing overhead } & \$ 16 & \text { per unit } \\\hline \text { Variable selling and administrative costs } & \$ 15,300 & \text { per year } \\\hline \text { Fixed selling and administrative costs } & \$ 10 & \text { per unit } \\\hline\end{array}$$ The beginning Finished Goods Inventory costs were $3500 under absorption costing and $2800 under variable costing.
What is the operating income using variable costing?

• A) $38,640
• B) $40,200
• C) $9840
• D) $2340

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Definitions:

De Facto Corporation

A corporation defectively incorporated in good faith that exists in fact though not in law.

Incorporation

The process of legally declaring a corporate entity as separate from its owners, providing it with its own rights, privileges, and liabilities distinct from those of its members.

Lease Agreement

A contract outlining the terms under which one party agrees to rent property owned by another party.

Novation

The substitution, by mutual agreement, of another party for one of the original parties to a contract.