[Anonymous]

I can’f figure out how CGS is calculated in this question and it is not included in the explanation. Side note – I used to post these questions to the Roger CPA review forums, but unfortunately they only answer their own software questions going forward. Thanks for your help

Augusta, Inc., expects manufacturing and sales of 70,000 units of product Maggie, its only product, to occur evenly over a 10-week period. Augusta pays for materials in the week following use. The balance of accounts payable for materials at the beginning of the 10-week period is $40,000. There are no beginning inventories. The fol­lowing information pertains to product Maggie for the 10-week period:

Sales price $11 per unit

Materials $3 per unit

Manufacturing conversion costs—Fixed $210,000

Variable $2 per unit

Selling and administrative costs—Fixed $45,000

Variable $1 per unit

Actual results are as budgeted, except that 60,000 of the 70,000 units produced were sold. Using absorp­tion costing, what is the difference between the reported income and the budgeted net income?

A.

$10,000

Correct B.

$20,000

C.

$75,000

D.

$95,000