Question
Mason Corporation began operations at the beginning of the current year. One of the companys products, a refrigeration element, sells for $185 per unit. Information
Mason Corporation began operations at the beginning of the current year. One of the companys products, a refrigeration element, sells for $185 per unit. Information related to the current years activities follows.
Variable costs per unit: | |||
Direct material | $ | 15 | |
Direct labor | 37 | ||
Manufacturing overhead | 46 | ||
Annual fixed costs: | |||
Manufacturing overhead | $ | 600,000 | |
Selling and administrative | 860,000 | ||
Production and sales activity: | |||
Production (units) | 24,000 | ||
Sales (units) | 20,000 | ||
|
Mason carries its finished goods inventory at the average unit cost of production and is subject to a 30 percent income tax rate. There was no work in process at year-end.
Required:
1. Determine the cost of the December 31 finished goods inventory.
Compute Masons net income for the current year ended December 31.
f next years production decreases to 23,000 units and general cost behavior patterns do not change, what is the likely effect on:
a. The direct-labor cost of $37 per unit?
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No change
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Increase
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Decrease
b. The fixed manufacturing overhead cost of $600,000?
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No change
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Increase
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Decrease
c. The fixed selling and administrative cost of $860,000?
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No change
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Increase
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Decrease
d. The average unit cost of production?
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No change
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Increase
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Decrease
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