The following information is available for Gray Corporation for the year just ended:

Production for the year 45,000 units Sales for the year ($8 sales price)

48,750 units Beginning inventory 8,750 units Standard production costs (for both current AND prior years)

Direct materials $ 3.60

Direct labor 1.00

Variable overhead 0.60

Fixed overhead 0.40

Selling and administrative costs:

Variable (per unit sold) $ 0.40

Fixed (per year) $ 150,000

Budgeted fixed overhead equaled actual fixed overhead The fixed overhead rate shown above is based on units of production based on an expected practical capacity of 100,000 units per year. There were no changes in work in process inventory for the period. For simplicity, assume that all costs and rates are the same as the prior year and the unit cost of inventory is unchanged. ANSWER THE FOLLOWING QUESTIONS:

16. What is the budgeted annual fixed manufacturing overhead? $__________________

17. If the company uses variable costing, what is the underapplied or overapplied fixed overhead? $_______________

18. Under absorption costing, what is the standard unit cost of inventory? $__________ per unit

19. Under variable costing, what is the unit cost of inventory? $__________ per unit

20. Under absorption costing, how much TOTAL expense would be recognized on the income statement for the current year? $_______________

21. Is income higher under absorption or variable costing? By what amount? ________________________ $_____________