Question
Mason Corporation began operations at the beginning of the current year. One of the companys products, a refrigeration element, sells for $195 per unit. Information
Mason Corporation began operations at the beginning of the current year. One of the companys products, a refrigeration element, sells for $195 per unit. Information related to the current years activities follows.
Variable costs per unit:
Direct material $ 20
Direct labor 36
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.
1. Determine the cost of the December 31 finished goods inventory.
2. Compute Masons net income for the current year ended December 31
. 3. If 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 $36 per unit? No change Increase Decrease
b. The fixed manufacturing overhead cost of $600,000? No change Increase Decrease
c. The fixed selling and administrative cost of $860,000? No change Increase Decrease
d. The average unit cost of production? No change Increase Decreas
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started