Vanstee Corporation Manufactures a Variety of Products

question 25

Multiple Choice

Vanstee Corporation manufactures a variety of products. Variable costing net operating income last year was $60,000 and this year was $67,000. Last year, $37,000 in fixed manufacturing overhead costs were deferred in inventory under absorption costing. This year, $8,000 in fixed manufacturing overhead costs were released from inventory under absorption costing.
-What was the absorption costing net operating income this year?

• A)$38,000
• B)$96,000
• C)$75,000
• D)$59,000

---

Definitions:

Unlevered Cost

The cost of capital for a project or investment without taking into account the effects of debt financing.

Pre-Tax Cost

The cost of an expense or investment before the impact of taxes is considered.

Debt-Equity Ratio

A calculation that indicates the financial leverage of a firm, determined by dividing its overall liabilities by the equity of the shareholders.