When Production Exceeds Sales

question 65

Multiple Choice

When production exceeds sales,

• A) ending inventory under variable costing will exceed ending inventory under absorption costing.
• B) ending inventory under absorption costing will exceed ending inventory under variable costing.
• C) ending inventory under absorption costing will be equal to ending inventory under variable costing.
• D) ending inventory under absorption costing may exceed, be equal to, or be less than ending inventory under variable costing.

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Definitions:

Retailers

Businesses that sell goods or commodities directly to consumers.

Perfected

In legal and financial contexts, describes a security interest or claim that has been legally established and recorded, making it enforceable against third parties.

Secured Party

A lender or creditor that has a claim on assets (collateral) of the borrower if the loan is not repaid according to agreed terms.

Collateral

Property or assets that a borrower offers to a lender as security for a loan, which can be seized if the loan is not repaid according to the agreed terms.