Vision Tester,Inc $\text { Production costs }$ $\text { Non-production costs }$

question 94

Multiple Choice

Vision Tester,Inc.,a manufacturer of optical glass,began operations on February 1 of the current year.During this time,the company produced 900,000 units and sold 800,000 units at a sales price of $12 per unit.Cost information for this year is shown in the following table:
$\text { Production costs }$
$\begin{array}{ll}\text { Direct materials } & \$ .80 \text { per unit } \\\text { Direct labor } & \$ .70 \text { per unit } \\\text { Variable overhead } & \$ 500,000 \text { in total } \\\text { Fixed overhead } & \$ 450,000 \text { in total }\end{array}$

$\text { Non-production costs }$
$\begin{array}{llr} \text { Variable selling and administrative } &\$ 30,000 \text {in total}\\ \text { Fixed selling and administrative } & \$ 490,000 \text {in total}\\\end{array}$

Given this information,which of the following is true?

• A) Net income under variable costing will exceed net income under absorption costing by $50,000.
• B) Net income under absorption costing will exceed net income under variable costing by $50,000.
• C) Net income will be the same under both absorption and variable costing.
• D) Net income under variable costing will exceed net income under absorption costing by $60,000.
• E) Net income under absorption costing will exceed net income under variable costing by $60,000.

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Definitions:

Price

The amount of money required to purchase a good or service, which can fluctuate based on supply and demand dynamics.

Production Technology

The set of processes, methods, or equipment used by firms in the production of goods or services, which affects productivity and efficiency.

Input Prices

The cost of raw materials and other inputs used in the production of goods and services. Lower input prices can increase profitability for producers.