Assume a company reported the following information for this year: Budgeted (estimated) production 80,000 units Budgeted sales 80,000 units Production capacity 100,000 units Selling price $ 25 per unit Variable manufacturing cost $ 14 per unit Estimated total manufacturing overhead cost (all fixed) $ 700,000 Selling and administrative expenses (all fixed) $ 209,000 Beginning inventories $ 0 Using a predetermined overhead rate based on capacity with "units produced” as the allocation base, the company's budgeted income statement would report a net operating income that is closest to: Multiple Choice $111,000 $56,000 $91,000 $61,000
Assume a company reported the following information for this year: Budgeted (estimated) production 80,000 units Budgeted sales 80,000 units Production capacity 100,000 units Selling price $ 25 per unit Variable manufacturing cost $ 14 per unit Estimated total manufacturing overhead cost (all fixed) $ 700,000 Selling and administrative expenses (all fixed) $ 209,000 Beginning inventories $ 0 Using a predetermined overhead rate based on capacity with "units produced” as the allocation base, the company's budgeted income statement would report a net operating income that is closest to: Multiple Choice $111,000 $56,000 $91,000 $61,000
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
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Variance Analysis
In layman's terms, variance analysis is an analysis of a difference between planned and actual behavior. Variance analysis is mainly used by the companies to maintain a control over a business. After analyzing differences, companies find the reasons for the variance so that the necessary steps should be taken to correct that variance.
Standard Costing
The standard cost system is the expected cost per unit product manufactured and it helps in estimating the deviations and controlling them as well as fixing the selling price of the product. For example, it helps to plan the cost for the coming year on the various expenses.
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Transcribed Image Text:Assume a company reported the following information for this year: Budgeted (estimated) production
80,000 units Budgeted sales 80,000 units Production capacity 100,000 units Selling price $ 25 per unit
Variable manufacturing cost $ 14 per unit Estimated total manufacturing overhead cost (all fixed) $ 700,000
Selling and administrative expenses (all fixed) $ 209,000 Beginning inventories $ 0 Using a predetermined
overhead rate based on capacity with "units produced” as the allocation base, the company's budgeted
income statement would report a net operating income that is closest to: Multiple Choice $111,000 $56,000
$91,000 $61,000
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