The Computation of Absorption-Costing Gross Profit Always Involves Subtracting

question 19

Multiple Choice

The computation of absorption-costing gross profit always involves subtracting

• A)all current-year fixed manufacturing overhead.
• B)some, but not all, current-year fixed manufacturing overhead.
• C)all fixed manufacturing overhead applied to units sold in the current year.
• D)no fixed manufacturing overhead.

---

Definitions:

Petty Cash System

A method used by businesses to manage small, daily expenses, involving a small store of cash on hand.

Cash Payments

Financial activities that result in the spending of cash to fulfill debts or acquire products and services.

Bank Reconciliation

The process of matching and comparing figures from accounting records against those shown on a bank statement to ensure they are in agreement.

Journal Entries

Records that document financial transactions in an accounting system, indicating the accounts and amounts to be debited and credited.