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7.

Marst Corporation's budgeted production in units and budgeted raw materials purchases over the next three months are given below:

	January	February	March
Budgeted production (in units)	70,400	?	82,000
Budgeted raw materials purchases (in pounds)	195,009	157,600	160,800

Three pounds of raw materials are required to produce one unit of product. The company wants raw materials on hand at the end of each month equal to 21% of the following month's production needs. The company is expected to have 44,352 pounds of raw materials on hand on January 1. Budgeted production for February should be:

Multiple Choice

• 82,600 units

• 105,740 units

• 82,000 units

• 44,700 units

8.

Assume the following information for a company that produced 10,000 units and sold 8,000 units during its first year of operations and produced 8,000 units and sold 10,000 units during its second year of operations:

	Per Unit	Per Year
Selling price	$ 200
Direct materials	$ 70
Direct labor	$ 50
Variable manufacturing overhead	$ 8
Sales commission	$ 8
Fixed selling and administrative expense		$ 110,000
Fixed manufacturing overhead		$ 300,000

Using absorption costing, what is the net operating income for the second year of operations?

Multiple Choice

• $170,000

• $190,000

• $220,000

• $200,000