During Its First Year of Operations,the McCormick Company Incurred the Following

question 71

Multiple Choice

During its first year of operations,the McCormick Company incurred the following manufacturing costs: Direct materials,$5 per unit,Direct labor,$3 per unit,Variable overhead,$4 per unit,and Fixed overhead,$250,000.The company produced 25,000 units,and sold 20,000 units,leaving 5,000 units in inventory at year-end.Income calculated under variable costing is determined to be $315,000.How much income is reported under absorption costing?

• A)$315,000
• B)$265,000
• C)$565,000
• D)$365,000
• E)$290,000

---

Definitions:

Borrow

The act of receiving funds from another party under the agreement to return the principal amount along with interest.

Cash Budget

A financial plan that estimates cash inflows and outflows over a specific period, used to manage liquidity and ensure financial stability.

Capital Expenditures Budget

A budget allocated for long-term investments, such as buying new machinery, buildings, or technology, that will be used over time.

Budgeted Income Statement

A financial statement that estimates a company's revenue, expenses, and net income for a future period based on planned operations and strategies.