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Valyn Corporation employs an absorption costing system for internal reporting purposes; however, the company is considering using variable costing. Data regarding Valyn's planned and actual operations for the calendar year are presented below.
Planned Actual Activity Activity Beginning finished goods inventory 35,000 35,000 Sales 140,000 125,000 Production 140,000 130,000 Planned Planned Actual Cost Costs Incurred Per Unit Total Costs Direct materials $12.00 $1,680,000 $1,560,000 Direct labor 9.00 1,260,000 1,170,000 Variable manufacturing overhead 4.00 560,000 520,000 Fixed manufacturing overhead 5.00 700,000 715,000 Variable selling expenses 8.00 1,120,000 1,000,000 Fixed selling expenses 7.00 980,000 980,000 Variable administrative expenses 2.00 280,000 250,000 Fixed administrative expenses 3.00 420,000 425,000 Total $50.00 $7,000,000 $6,620,000
The planned per unit cost figures shown in the above schedule were based on Valyn producing and selling 140,000 units. Valyn uses a predetermined manufacturing overhead rate for applying manufacturing overhead to its product; thus, a combined manufacturing overhead rate of $9.00 per unit was employed for absorption costing purposes. Any over- or underapplied manufacturing overhead is closed to the Cost of Goods Sold account at the end of the reporting year. The beginning finished goods inventory for absorption costing purposes was valued at the previous year's planned unit manufacturing cost, which was the same as the current year's planned unit manufacturing cost. There are no work-in-process inventories at either the beginning or the end of the year. The planned and actual unit selling price for the current year was $70.00 per unit.
Valyn Corporation's total fixed costs expensed this year on the absorption costing basis were
A. $2,030,000 B. $2,055,000 C. $2,120,000 D. $2,095,000 |