Fields Cutlery, a Manufacturer of Gourmet Knife Sets, Produced 20,000

question 45

Multiple Choice

Fields Cutlery, a manufacturer of gourmet knife sets, produced 20,000 sets and sold 23,000 units during the current year. Beginning inventory under absorption costing consisted of 3,000 units valued at $66,000 (Direct materials $12 per unit; Direct labor, $3 per unit; Variable Overhead, $2 per unit, and Fixed overhead, $5 per unit.) All manufacturing costs have remained constant over the 2-year period. At year-end, the company reported the following income statement using absorption costing: 60% of total selling and administrative expenses are variable. Compute net income under variable costing.

• A) $414,000
• B) $399,000
• C) $529,000
• D) $429,000
• E) $644,000

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Definitions:

Formalization

The extent to which rules, procedures, and standards are written and explicitly articulated within an organization to guide behaviors and operations.

Centralization

Refers to the degree to which decision-making is concentrated at a single point in an organization, often at the top leadership levels.

Bureaucratic

Characterized by rigid adherence to rules, procedures, and hierarchical structures, often at the expense of efficiency and flexibility.

Hierarchy

An arrangement or institution where individuals or entities are positioned in a hierarchical order based on their status or power.