Catherman Corporation manufactures one product. It does not maintain any beginning or ending inventories. The company uses a standard cost system in which inventories are recorded at their standard costs and any variances are closed directly to Cost of Goods Sold.
During the year, the company produced and sold 32,400 units at a price of $42.30 per unit. Its standard cost per unit produced is $36.90 and its selling and administrative expenses totaled $102,000. The company does not have any variable manufacturing overhead costs and it recorded the following variances during the year:

-The net operating income for the year is closest to:
A) $107,269
B) $6,150
C) $89,348
D) $72,960

Question

Catherman Corporation manufactures one product. It does not maintain any beginning or ending inventories. The company uses a standard cost system in which inventories are recorded at their standard costs and any variances are closed directly to Cost of Goods Sold.
During the year, the company produced and sold 32,400 units at a price of $42.30 per unit. Its standard cost per unit produced is $36.90 and its selling and administrative expenses totaled $102,000. The company does not have any variable manufacturing overhead costs and it recorded the following variances during the year:
 
-The net operating income for the year is closest to:
A) $107,269 
B) $6,150 
C) $89,348 
D) $72,960

Quizplus · Accepted Answer

11ea7761_16f4_b3c6_81a5_2f4ea9524d6a_TB2580_00 An unfavorable total variance has the effect of increasing Cost of Goods Sold and thereby decreasing Retained Earnings. A favorable variance has the opposite effects on Cost of Goods Sold and Retained Earnings.
 11ea7761_16f4_b3c7_81a5_a739691c8b15_TB2580_00

Catherman Corporation Manufactures One Product