Required information [The following information applies to the questions displayed below.] 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 $ 20 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

Questions

1.

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 $37 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

Decrease