Befuddled But Brilliant Old Professor Mullen's Gourmet Food Company sells its product for $60 per unit. During 2017, it produced (IN) 60,000 units and sold (OUT) 50,000 units (there was no beginning inventory or BI = 0) Costs per unit are: direct materials (DM) $15, direct labor (DL) $9, and variable overhead (VOH) $3. Fixed costs are: $720,000 (FOH) manufacturing overhead, and $90,000 (S&A) selling and administrative expenses. 15. a. Under absorption costing (ABS), what amount of fixed overhead (FOH) is deferred to a future period?
A) $30,000.
B) $120,000.
C) $150,000.
D) $720,000.
b. Net income under absorption costing is higher than net income under variable costing:.
A) when units produced (P) exceed units sold (S).
B) when units produced (P) equal units sold (S).
C) when units produced (P) are less than units sold (S).
D) regardless of the relationship between units produced (P) and units sold (S).
c. It costs Kit Kat Company $12 of variable and s$ of fixed costs to produce one bathroom scale which normally sells for $35. A foreign wholesaler offers to purchase 2,000 scales at $15 each Kit Kat would incur special shipping costs of $1 per scale if the order were accepted. Kit Kat has sufficient unused (excess) capacity to produce the 2 accepted, what will be the effect on net income?
A) $4,000 increase.
B) $4,000 decrease.
C) $6,000 decrease.
D) $30,000 increase.
If the special order is 18. Bow-wow Company manufactures a product with a unit variable cost of $50 and a unit sales price of $88. Fixed manufacturing costs were $240,000 when 10,000 units were produced and sold. The company has a one-time opportunity to sell an additional 1,000 units at $70 each in a foreign market which would not affect its present sales. If the company has sufficient (excess) capacity to produce the additional units, acceptance of the special order would affect net income as follows:
A) Income would decrease by $4,000.
B) Income would increase by $4,000.
C) Income would increase by $70,000.
D) Income would increase by $20,000.