Question

66

Aaron Corporation, which has only one product, has provided the following data concerning its most recent month of operations:

Selling price	$	127
Units in beginning inventory		0
Units produced		6,650
Units sold		6,350
Units in ending inventory		300

Variable costs per unit:
Direct materials	$	19
Direct labor	$	49
Variable manufacturing overhead	$	13
Variable selling and administrative expense	$	13
Fixed costs:
Fixed manufacturing overhead	$	179,550
Fixed selling and administrative expense	$	26,100

What is the unit product cost for the month under variable costing?

Multiple Choice

• $94 per unit

• $121 per unit

• $108 per unit

• $81 per unit

67

Krepps Corporation produces a single product. Last year, Krepps manufactured 25,000 units and sold 20,000 units. Production costs for the year were as follows:

Direct materials	$	180,000
Direct labor	$	120,000
Variable manufacturing overhead	$	210,000
Fixed manufacturing overhead	$	250,000

Sales totaled $850,000 for the year, variable selling and administrative expenses totaled $110,000, and fixed selling and administrative expenses totaled $170,000. There was no beginning inventory. Assume that direct labor is a variable cost.

Under variable costing, the company's net operating income for the year would be:

Multiple Choice

• $28,000 lower than under absorption costing.

• $28,000 higher than under absorption costing.

• $50,000 lower than under absorption costing.

• $50,000 higher than under absorption costing.