Foundations, Inc. produces and sells cosmetic products. Currently, the company is operating at 70% of its capacity. The sales price of its product is $30 per unit, and it incurs a full cost of $25 to produce each unit. Its yearly fixed manufacturing overhead amounts to $20,000. The company has received a one-time order for supplying 5,000 units at $26 per unit. This order can be executed within the excess production capacity and will not involve any additional fixed costs. To make this decision, the management of Foundations should use ________. A. variable costing as the decision is short-term in nature B. variable costing as the decision is long-term in nature C. absorption costing as the decision is short-term in nature D. absorption costing as the decision is long-term in nature
Foundations, Inc. produces and sells cosmetic products. Currently, the company is operating at 70% of its capacity. The sales price of its product is $30 per unit, and it incurs a full cost of $25 to produce each unit. Its yearly fixed manufacturing overhead amounts to $20,000. The company has received a one-time order for supplying 5,000 units at $26 per unit. This order can be executed within the excess production capacity and will not involve any additional fixed costs. To make this decision, the management of Foundations should use ________. A. variable costing as the decision is short-term in nature B. variable costing as the decision is long-term in nature C. absorption costing as the decision is short-term in nature D. absorption costing as the decision is long-term in nature
Chapter10: Short-term Decision Making
Section: Chapter Questions
Problem 6PA: Gent Designs requires three units of part A for every unit of Al that it produces. Currently, part A...
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Foundations, Inc. produces and sells cosmetic products. Currently, the company is operating at 70% of its capacity. The sales price of its product is $30 per unit, and it incurs a full cost of $25 to produce each unit. Its yearly fixed manufacturing overhead amounts to $20,000. The company has received a one-time order for supplying 5,000 units at $26 per unit. This order can be executed within the excess production capacity and will not involve any additional fixed costs. To make this decision, the management of Foundations should use ________.
variable costing as the decision is short-term in nature
variable costing as the decision is long-term in nature
absorption costing as the decision is short-term in nature
absorption costing as the decision is long-term in nature
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