When Units Produced Exceeds Units Sold

question 32

Multiple Choice

When units produced exceeds units sold

• A)net income under absorption costing is higher than net income under variable costing.
• B)net income under absorption costing is lower than net income under variable costing.
• C)net income under absorption costing equals net income under variable costing.
• D)the relationship between net income under absorption costing and net income under variable costing cannot be predicted.

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Definitions:

LIBOR

London Interbank Offered Rate; the rate that large banks in London charge one another.

Floating-Rate Debt

A type of debt instrument with interest rates that adjust periodically based on a benchmark interest rate or index.

Fixed Rate Debt

A type of loan or security with an interest rate that remains constant throughout the life of the loan or security.

Interest Rate Swaps

Financial derivatives contracts where two parties agree to exchange one stream of interest payments for another, based on a specified principal amount.