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

question 25

Multiple Choice

(Appendix 5A) Prehn 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 36, 000 units and sold 30, 000 units.The company's only product is sold for $251 per unit. The company is considering using either super-variable costing or a variable costing system that assigns $28 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 $168, 000.
• B)Super-variable costing net operating income exceeds variable costing net operating income by $420, 000.
• C)Variable costing net operating income exceeds super-variable costing net operating income by $420, 000.
• D)Variable costing net operating income exceeds super-variable costing net operating income by $168, 000.

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Definitions:

Regression

A statistical method used for estimating the relationships among variables.

Adult

An individual who has achieved full physical and psychological maturity.

Defence Mechanism

Psychological tactics employed subconsciously by different entities to deal with real-world scenarios and preserve their self-perception.

Regression

In psychology, a defense mechanism leading individuals to revert to a less mature state of psychological development under stress or as an analytical process involving fitting a model to data.