Use the Information Below to Answer the Following Question(s)

question 28

Multiple Choice

Use the information below to answer the following question(s) .
Fair Score Company manufactures scoreboards for athletic events. It expects to sell 20,000 scoreboards in 2015. The company has enough beginning inventory of direct materials to produce 8,000 units. Beginning work-in-process inventory totals 2,000 units and is 100 percent complete as to material and 50 percent complete as to labour and overhead. Beginning finished units total 4,000 with a target ending finished inventory of 3,000 units. The scoreboards sell for $800. There is no ending work-in-process inventory. Direct materials costs for each scoreboard total $200 while direct labour is $80. Manufacturing overhead is $60 per scoreboard.
-How many scoreboards should Fair Score Company produce in 2015?

• A) 23,000
• B) 21,000
• C) 20,000
• D) 19,000

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Definitions:

Degree of Operating Leverage

A ratio that measures the effect of a change in sales on operating income by analyzing fixed versus variable costs.

Sales Increase

The rise in the amount of goods or services sold over a specific period, indicating business growth.

Net Operating Income

Measures the profit a company generates from its core business operations, excluding expenses related to interest and taxes.

Selling Price

The price at which a product or service is sold to customers.