Williams Company produces brooms and had the following costs, volumes, and prices in 1996:

Variable Manufacturing costs (per broom)

Raw Materials (straw and wood) $3.00

Direct Labor $2.00

Variable Overhead $1.00

Fixed Manufacturing Costs $6,000/year

Nonmanufacturing Costs: SG&A

Fixed SG&A $4,000/year

Variable SG&A $4/unit

1996 Selling Price $18.00/unit

1996 Sales 3,000 units

Net Income is $1500 greater if production increases from 3,000 units to 4,000 units. Where is the $1,500?

A) Nowhere, the company simply incurred $1500 less in producing the 4000 units.

B) On the balance sheet as ending inventory balance.

C) On the cash flow statement as investing cash.

D) On the Income Statement as Fixed Manufacturing costs.

Where is the $6000 fixed overhead recognized if the company produced 4000 units and the company uses variable costing?

A) Nowhere.

B) On the balance sheet as ending inventory balance.

C) On the cash flow statement as investing cash.

D) On the Income Statement as Fixed Manufacturing costs.

Would the COGS on the income statement and ending inventory balance on the balance sheet change if the Fixed Manufacturing costs consisted solely of depreciation on the plant?

A) Yes

B) No