Fahey Company Manufactures a Single Product That It Sells for $25

question 42

Multiple Choice

Fahey Company manufactures a single product that it sells for $25 per unit. The company has the following cost structure: There were no units in beginning inventory. During the year, 18,000 units were produced and 15,000 units were sold.
-The company's net operating income for the year under variable costing is:

• A)$60,000
• B)$81,000
• C)$57,000
• D)$69,000

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Definitions:

Conversion Cost

The combined costs of direct labor and manufacturing overhead, reflecting the expenses to convert raw materials into finished goods.

Factory Overhead Cost

Indirect costs associated with manufacturing, such as utilities, maintenance, and salaries for managers, that cannot be traced directly to specific products.

Direct Labor Cost

The cost associated with the work done by those actually manufacturing a product or directly providing a service.

Factory Overhead

Refers to all the indirect manufacturing costs, such as utilities and rent for the production facilities, which are not directly tied to individual products.