Philpott's Operating Income Using Absorption Costing Is $100

question 86

Multiple Choice

Philpott's operating income using absorption costing is $100. Its inventories using both absorption and variable costing are as follows: Under variable costing, operating income would be:

• A) $102
• B) $94
• C) $100
• D) $96

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Definitions:

Departmental Predetermined Overhead Rates

The overhead rates set for specific departments within a company, based on estimated costs and activity levels.

Manufacturing Cost

The total expense incurred in the process of producing a product, including raw materials, labor, and overhead.

Selling Price

The price at which a product or service is offered to consumers.

Markup

The percentage of the cost added to the cost price of items to cover overhead expenses and profit.