On January 1,2016,D Corp

question 36

Multiple Choice

On January 1,2016,D Corp.granted an employee an option to purchase 6,000 shares of D's $5 par common stock at $20 per share.The options became exercisable on December 31,2017,after the employee completed two years of service.The option was exercised on January 10,2018.The market prices of D's stock were as follows: January 1,2016,$30;December 31,2017,$50;and January 10,2018,$45.An option pricing model estimated the value of the options at $8 each on the grant date.For 2016,D should recognize compensation expense of:

• A)$ 0.
• B)$24,000.
• C)$30,000.
• D)$60,000.

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Definitions:

Machine Setups

The process of preparing and adjusting machines for a specific production run.

Fixed Manufacturing Cost

Costs that do not change with the level of production, such as salaries of permanent staff and rent for factory space.

Production Volume

The total quantity of products manufactured during a specific period.

Fixed Component

A cost or value that remains unchanged regardless of the level of output or activity, such as rent or salaried wages.