McArthur Corp

question 48

Multiple Choice

McArthur Corp., which began business at the start of the current year, had the following data:
Planned and actual production: 40,000 units
Sales: 38,000 units at $15 per unit
Production costs:
Variable: $5 per unit
Fixed: $260,000
Selling and administrative costs:
Variable: $1 per unit
Fixed: $32,000
The gross margin that the company would disclose on an absorption-costing income statement is:

• A) $0.
• B) $133,000.
• C) $166,500.
• D) $342,000.
• E) None of the other answers are correct.

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Definitions:

Cash Inflows

The total amount of money being transferred into a company, typically from operations, financing, and investing activities.

NPV

A financial metric that calculates the present value of projected cash flows of an investment, minus the initial investment cost.

Discount Rate

The interest rate used to determine the present value of future cash flows in discounted cash flow analysis, reflecting the opportunity cost of capital.

Drive Axle

An axle that is connected to the drive train and responsible for transferring power from the engine to the wheels.