A Business Operated at 100% of Capacity During Its First

question 120

Multiple Choice

A business operated at 100% of capacity during its first month and incurred the following costs: ​
If 1,000 units remain unsold at the end of the month and sales total $150,000 for the month,what is the amount of the manufacturing margin that would be reported on the absorption costing income statement?

• A) $50,000
• B) $54,000
• C) not reported
• D) $70,000

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Definitions:

Net Realisable Value Method

An accounting technique used to calculate the value of an inventory or asset, minus any costs associated with its sale or disposal.

Joint Production Costs

The costs incurred in the process of producing two or more products simultaneously from the same raw materials or process.

Specialised Equipment

Equipment designed for a specific purpose or unique task, often requiring specific skills or technology to operate effectively.

Fixed Overhead

Costs associated with operating a business that do not change in relation to production volume or sales, such as rent, salaries, and insurance.