Under Which of the Following Conditions Is Net Income Higher

question 4

Multiple Choice

Under which of the following conditions is net income higher under absorption costing (relative to variable costing) ?

• A)Current period production exceeds sales.
• B)Inventory is reduced during the current period.
• C)Sales prices are rising.
• D)Net income is higher under absorption costing under all conditions.

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Definitions:

Maximum Profit

The highest possible financial gain a firm can achieve when all factors of production are optimized.

Memory Company

A business specializing in the production of memory storage devices, such as RAM and flash memory.

Normal Return

The minimum profit needed for a company to remain competitive in the market, covering its opportunity costs.

Government Regulates

The process by which governments impose rules and directives to govern the operation of markets and industries, often to protect consumers and maintain fair competition.