Management May Be Tempted to Overproduce When Using

question 62

Multiple Choice

Management may be tempted to overproduce when using

• A) variable costing, in order to increase net income.
• B) variable costing, in order to decrease net income.
• C) absorption costing, in order to increase net income.
• D) absorption costing, in order to decrease net income.

---

Definitions:

Discounted Note

A promissory note whose proceeds at issuance are less than its face value, due to interest being deducted or discounted in advance.

Borrowing Funds

The act of obtaining money from external sources, like banks or investors, which must usually be repaid with interest.

Interest Expense

The cost incurred by an entity for borrowed funds, payable to lenders as a finance charge over the term of the loan.

Existing Account Payable

Existing Account Payable refers to accounts payable obligations that are currently outstanding, representing previous credit purchases yet to be settled.