Answer:
C. The amount of fixed manufacturing overhead released from inventories is $12,000
Explanation:
Fixed manufacturing overhead in year 1 = $432,000
Production of units in Year 1 = 12,000 units
Thus, fixed manufacturing overhead per unit in year 1 = $432,000 / 12,000 units = $36 per unit
Inventory at the end of year 1 = 3,000 units
Fixed manufacturing overhead deferred in year 1 = 3000 units * $36 per unit = $108,000
Now, lets calculate for year 2:
Production units: 9000 units
Fixed manufacturing overhead per unit in year 2 : $432,000 / 9,000 units = $48 per unit
Fixed manufacturing overhead in closing inventory = 2000 units * 48 = $96,000
<em>Fixed manufacturing overhead released from inventory = Fixed manufacturing overhead in beginning inventory - Fixed manufacturing overhead in ending inventory</em>
Now, applying the formula (as stated above) for calculating fixed manufacturing overhead released from inventory in year 2:
Fixed manufacturing overhead (FMOH) released from inventory in year 2 = FMOH in year 1 - FMOH in year 2
= $108,000 - $96,000 =
= $12,000.
