Answer:
Recording fixed manufacturing overhead as element of the cost of plant assets constructed by a company for its own use:
a) When to exclude completely: During periods of low production activity, capitalization of fixed overhead costs would reduce the amount assigned to operational activities. This implies that profits will be overstated in some periods and understated in others.
b) When to include at the same rate as is charged to normal operations: To avoid misstatement of both plant assets and finished goods, it is important to allocate overhead costs at the same rate to plant asset construction as is done for normal operations.
Explanation:
Much of the fixed manufacturing overhead will be the depreciation costs for factory building and equipment. Sometimes, companies construct their plant assets internally. The problem arises when deciding whether to allocate fixed manufacturing overhead costs or not and when to allocate. The decision requires some thinking to decide when it is appropriate.
Answer:
The net operating income increases by $11,000.
Explanation:
Data provided
Sales 3,000 units
Sales Price $70 per unit
Variable Cost $50 per unit
Fixed Cost $25,000
We can calculate the contribution margin as:
Contribution margin = sales price - variable cost = (70-50) = 20
The net operating income can be defined as:
According to the changes proposed in the problem
Contribution margin = 20 * (1+0.1) = 22
Fixed cost = 25,000 * (1-0.2) = 20,000
The new net operating income is:
Then
With these changes, the net operating income increases by $11,000.
I think the answer is D. irrigation tell me if im right please
