The Level of Inventory of a Manufactured Product Has Increased

question 14

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 absorption costing is used rather than variable costing would be a(n)

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

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Definitions:

Spending Multipliers

Describe the effect of a change in spending (typically by the government) on the total economic output, indicating how initial spending leads to increased levels of income and consumption.

Permanent Income

A theory suggesting that people's consumption choices are more influenced by their expected long-term average income rather than by their current income.

Consumption Spending

Expenditures by individuals and households on goods and services for personal use.

Aggregate Supply

The total supply of goods and services that firms in an economy are willing and able to sell at a given price level in a specific period.