The Level of Inventory of a Manufactured Product Has Increased

question 95

Multiple Choice

The level of inventory of a manufactured product has increased by 8,000 units during a period. The following data are also available: The effect on operating income if variable costing is used rather than absorption costing would be a(n)

• A)$80,000 decrease
• B)$80,000 increase
• C)$104,000 decrease
• D)$104,000 increase

---

Definitions:

Accounts Receivable

Money owed to a company by customers for products or services that have been delivered or used but not yet paid for.

Income Tax Payable

This represents the amount of income tax that a company owes to the government but has not yet paid.

Sales

The transactions involving the exchange of goods or services for money, reflecting the primary revenue activity of a business.

Free Cash Flow

The amount of cash generated by a business after accounting for operational expenses and capital expenditures, available for distribution or reinvestment.