Nitrol Corporation Manufactures Brass Vases Using a Standard Cost System

question 72

Multiple Choice

Nitrol Corporation manufactures brass vases using a standard cost system with standard machine-hours as the activity base for overhead.The following information relates to vase production at Nitrol for last year: The standard machine-hours per vase is 1.25.Last year Nitrol produced 84,000 vases. What was Nitrol's fixed manufacturing overhead volume variance for last year?

• A)$2,500 Favorable
• B)$7,500 Favorable
• C)$12,500 Favorable
• D)$40,000 Unfavorable

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Definitions:

Balance Sheet Accounts

Accounts that are reported on the balance sheet and reflect the company's assets, liabilities, and equity at a point in time.

Cash Basis Accounting

A method of accounting where transactions are recorded when cash is actually received or paid, rather than when it is earned or incurred.

Accrual Basis

An accounting method where revenue and expenses are recorded when they are earned or incurred, regardless of when cash transactions occur.

Revenue Recognition

Revenue recognition is the accounting principle governing when revenue is considered earned and can be recorded.