Freetown Corporation Incurred Fixed Manufacturing Costs of $34,000 During 2017

question 153

Multiple Choice

Freetown Corporation incurred fixed manufacturing costs of $34,000 during 2017.Other information for 2017 includes:
The budgeted denominator level is 2,000 units.
Units produced total 1,800 units.
Units sold total 1,300 units.
Beginning inventory was zero.
The company uses absorption costing and the fixed manufacturing cost rate is based on the budgeted denominator level.Manufacturing variances are closed to cost of goods sold.
Operating income using absorption costing will be ________ than operating income if using variable costing.(Round any intermediary calculations to the nearest cent and your final answer to the nearest dollar. )

• A)$11,900 higher
• B)$9,444 lower
• C)$8,500 higher
• D)$22,100 lower

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Definitions:

Financial Statement

A record that outlines the financial activities and condition of a business including balance sheet, income statement, and cash flow statement.

Misstatements

Errors or inaccuracies in financial statements that can arise from oversight or misinterpretation of financial information.

Omissions

Instances where information that should have been included in a document or conversation was left out, either intentionally or unintentionally.

Declining Balance

Declining balance is a method of accelerated depreciation in which an asset's book value is reduced at a faster rate in the early years of its life.