A Business Operated at 100% of Capacity During Its First

question 116

Multiple Choice

A business operated at 100% of capacity during its first month and incurred the following costs: If 1,500 units remain unsold at the end of the month, what is the amount of inventory that would be reported on the variable costing balance sheet?

• A) $62,500
• B) $73,500
• C) $60,000
• D) $52,500

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Definitions:

Merchandise

Goods bought and sold by a business in the ordinary course of its trading activity.

Credit

An accounting entry that increases liabilities or equity or decreases assets, or an arrangement to receive cash, goods, or services now and pay for them in the future.

Credit Sales

Transactions where goods or services are sold to a customer with an agreement to pay at a later date.

Cash Collection

The process of receiving and processing payments from customers.