The following information pertains to questions 16 and 17. Mediocre Manufacturing Company produces a single product. Management budgeted the following costs for its first year of operations. These costs are based on a budgeted volume of 4,000 units produced and sold: Direct materials $ 28,000 Direct labor $ 14,000 Manufacturing overhead Variable $ 56,000 Fixed $ 63,000 Selling and administrative Variable $ 7,000 Fixed $ 42,000 During the first year of operations, Mediocre actually produced 4,000 units but only sold 3,500 units. Actual costs did not fluctuate from the cost behavior patterns described above. The 3,500 units were sold for $72 per unit.
16. What is the total cost that would be assigned to Mediocre's finished goods inventory at the end of the first year of operations under the absorption costing method?
A. $12,250
B. $20,125
C. $23,000
D. $26,250
E. None of the above
17. Under the variable costing method, what is Mediocre's actual net operating income for its first year?
A. $42,000
B. $54,250
C. $55,125
D. $63,000
E. None of the above
