Swifton Corporation Produces a Single Product

question 212

Multiple Choice

Swifton Corporation produces a single product. Last year, the company had net operating income of $40,000 using variable costing. Beginning and ending inventories were 22,000 and 27,000 units, respectively. If the fixed manufacturing overhead cost was $3 per unit both last year and this year, what was the income using absorption costing?

• A)$15,000
• B)$25,000
• C)$40,000
• D)$55,000

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Definitions:

Sales Increase

The rise in the volume or amount of sales over a specific period, reflecting business growth.

Net Operating Income

The profit generated from a company's core business operations after deducting all operating expenses except for interest and taxes.

Degree Of Operating Leverage

A financial metric that measures the sensitivity of a company's operating income to its sales. Higher leverage indicates that a small change in sales can lead to a large change in operating income.

Contribution Format

A method of income statement presentation that separates variable costs from fixed costs, highlighting the contribution margin.