登录之后可查看解析

Answer (A) is correct . The choice of practical rather than master budget capacity as the denominator level will result in a lower absorption costing net income. Practical capacity is the maximum level at which output is produced efficiently, with an allowance for unavoidable interruptions, for example, for holidays and scheduled maintenance. Because this level will be higher than master-budget (expected) capacity, its use will usually result in the underapplication of fixed overhead. For example, given costs of $100,000 and master- budget capacity of 800,000 units, $.125 per unit is the application rate. If practical capacity is 1,250,000 units, the application rate is $.08 per unit. If actual production is 800,000 units, fixed overhead will not be over- or underapplied given the use of master-budget capacity. However, there will be $36,000 (450,000 units ¡Á $.08) of underapplied fixed overhead if practical capacity is the denominator level. Consequently, given that the beginning inventory is zero and that production exceeded sales, less fixed overhead will be inventoried at the lower practical capacity rate than at the master-budget rate. Thus, master-budget net income will be greater.Answer (B) is incorrect because A normal capacity rate results in a larger ending inventory and a greater net income than a theoretical or practical capacity rate.
Answer (C) is incorrect because The master-budget rate exceeds the theoretical capacity rate. It?results in a greater ending inventory and a greater net income.
Answer (D) is incorrect because A practical capacity rate results in a lower ending inventory and a lower net income than a normal capacity rate.