Which of the Following Is a Potential Advantage of Variable

question 52

Multiple Choice

Which of the following is a potential advantage of variable costing relative to absorption costing?

• A) Net income is affected by changes in production levels.
• B) The use of variable costing is consistent with cost-volume-profit analysis.
• C) Net income computed under variable costing is not closely tied to changes in sales levels.
• D) More than one of the above.

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Definitions:

Giffen Good

A product that experiences an increase in demand as its price rises, contrary to standard economic theory, due to its role as a staple good.

Income Increases

A situation where an individual's or household's earnings rise, leading to potential changes in spending behavior.

Utility Maximizing

The economic principle that individuals or firms seek to achieve the highest level of satisfaction or profit from their consumption or production choices.

Budget Constraint

The limit on the consumption bundles that a consumer can afford based on their income and the prices of goods and services.