1. A business operated at 100% of capacity during its first month and incurred t

Question

1. A business operated at 100% of capacity during its first month and incurred the following costs:

If 1,900 units remain unsold at the end of the month, what is the amount of inventory that would be reported on the variable costing balance sheet?

a.$63,707

b.$89,469

c.$76,169

d.$72,996

2. The level of inventory of a manufactured product has increased by 8,600 units during a period. The following data are also available:

What would be the effect on income from operations if absorption costing is used rather than variable costing?

a.$94,600 increase

b.$94,600 decrease

c.$68,800 increase

d.$68,800 decrease

3. A business operated at 100% of capacity during its first month and incurred the following costs:

If 1,600 units remain unsold at the end of the month, what is the amount of inventory that would be reported on the variable costing balance sheet?

a.$66,400

b.$78,400

c.$56,000

d.$64,000

Production costs (19,100 units): ??? Direct materials $170,600 ??? Direct labor 224,400 ??? Variable factory overhead 245,500 ??? Fixed factory overhead 93,300 $733,800 Operating expenses: ??? Variable operating expenses $125,200 ??? Fixed operating expenses 40,400 165,600

Explanation / Answer

1 Amount of inventory on the variable costing balance sheet = (170600+224400+245500)/19100*1900= $63707 2 Effect on income from operations = 8600*8= $68,800 increase 3 Amount of inventory on the variable costing balance sheet = (180000+240000+280000)/20000*1600= $56000

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