(Appendix 5A)Sagon Corporation Manufactures and Sells One Product

question 34

Multiple Choice

(Appendix 5A) Sagon Corporation manufactures and sells one product.The following information pertains to the company's first year of operations: The company does not have any variable manufacturing overhead costs or variable selling and administrative costs.During its first year of operations, the company produced 29, 000 units and sold 23, 000 units.The company's only product is sold for $231 per unit. The company is considering using either super-variable costing or a variable costing system that assigns $25 of direct labor cost to each unit that is produced.Which of the following statements is true regarding the net operating income in the first year?

• A)Super-variable costing net operating income exceeds variable costing net operating income by $150, 000.
• B)Super-variable costing net operating income exceeds variable costing net operating income by $336, 000.
• C)Variable costing net operating income exceeds super-variable costing net operating income by $336, 000.
• D)Variable costing net operating income exceeds super-variable costing net operating income by $150, 000.

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Definitions:

Gasoline

A flammable liquid derived from petroleum, used mainly as fuel in internal combustion engines.

Utility Function

A representation in economics of how a consumer ranks different bundles of goods according to the level of satisfaction or utility they provide.

Auto Repairs

Services aimed at fixing or maintaining the functional aspects of vehicles, ensuring they are safe and operational.

Gasoline

A liquid fuel made from petroleum and used primarily to power internal combustion engines.