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:

Capitalism

An economic system characterized by private ownership of the means of production and their operation for profit.

Socialism

A political and economic system where the means of production, distribution, and exchange are owned or regulated by the community as a whole.

Total Surplus

An economic measure representing the total benefits to consumers and producers, achieved by the difference between the willingness to pay and the actual price paid, plus the cost savings to producers.