164. CSO: 1C1d LOS: 1C1g
Dremmon Corporation uses a standard cost accounting system. Data for the last fiscal
year are as follows.
Units
Beginning inventory of finished goods 100
Production during the year 700
Sales 750
Ending inventory of finished goods 50
Per Unit
Product selling price $200
Standard variable manufacturing cost 90
Standard fixed manufacturing cost 20*
Budgeted selling and administrative costs (all fixed) $45,000
*Denominator level of activity is 750 units for the year.
There were no price, efficiency, or spending variances for the year, and actual selling and
administrative expenses equaled the budget amount. Any volume variance is written off
to cost of goods sold in the year incurred. There are no work-in-process inventories.
Assuming that Dremmon used absorption costing, the amount of operating income earned
in the last fiscal year was
a. $21,500.
b. $27,000.
c. $28,000.
d. $30,000.
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