CC Uses Absorption (Full)costing and Its Direct Competitor,FF Uses

question 2

Multiple Choice

CC uses absorption (full) costing and its direct competitor,FF uses variable costing for internal decision making purposes.Last year,both companies reported the same production and sales volumes.Which is true?

• A)If sales are 10,000 units and production 12,000 units,CC's net income exceeds FF's
• B)If sales are 10,000 units and production 10,000 units,FF's net income exceeds CC's
• C)If sales are 10,000 units and production 8,000 units,FF's net income exceeds CC's
• D)If sales are 12,000 units and production 10,000 units,FF's net income equals CC's
• E)Unable to determine

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Definitions:

Pension Expense

The annual cost recognized by an employer for maintaining a retirement plan for its employees.

Actuarial Assumptions

Estimates used to calculate the present and future financial obligations of pension plans and insurance policies, often involving life expectancy and interest rates.

Present Values

The current value of a future amount of money or stream of cash flows, discounted at a particular rate of interest.

Expense Accruals

The recording of expenses that have been incurred but not yet paid, ensuring that expenses are matched with the revenues they helped generate in the same period.