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

question 10

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 an absorption costing system that assigns $25 of direct labor cost and $56 of fixed manufacturing overhead 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 absorption costing net operating income by $486, 000.
• B)Absorption costing net operating income exceeds super-variable costing net operating income by $336, 000.
• C)Absorption costing net operating income exceeds super-variable costing net operating income by $486, 000.
• D)Super-variable costing net operating income exceeds absorption costing net operating income by $336, 000.

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Definitions:

Variation

Differences in products, services, or processes that distinguish them from others in the same category.

Direct Investment

The purchase or acquisition of a controlling interest in foreign business enterprises, typically involving significant management and ownership.

Global Market Entry Strategy

A planned method of delivering goods or services to a new target market and establishing a presence in a foreign country.

International Sales

The practice of selling products or services beyond a company's domestic borders, into foreign markets.