Far 6
Far 6
Purchases: $102,800
What amount should Azur report as cost of goods sold for the year?
a. $102,800
b. $118,220
c. $123,360
d. $128,500
10. Per the Codification, what is considered the normal capacity of production facilities?
c. Actual production for the period plus loss of capacity for planned maintenance.
Correct Answer: D) A range that may vary based on business and industry-specific factors.
Notes
(d) Normal capacity refers to a range in production levels that will vary based on business and industry-
specific factors. Normal capacity is the production expected to be achieved over a number of periods or
seasons under normal circumstances, taking into account the loss of capacity resulting from planned
maintenance. Answer (a) is incorrect because the Codification does not specify a formula for calculating
normal capacity. Answers (b) and (c) are incorrect because actual production may only be used if it
approximates normal capacity.
a. Allocated to finished goods and cost of goods sold based on ending balances in the accounts.
b. Allocated to raw materials, work in process, and finished goods, based on the ending balances in the
accounts.
d. Allocated to work in process, finished goods, and cost of goods sold based on ending balances in the
accounts.
Correct Answer: C) Recognized as an expense in the period in which they are incurred.
Notes
(c) Unallocated fixed overhead costs are recognized as an expense in the period in which they are
incurred. Therefore, answers (a), (b), and (d) are incorrect.