At the End of the Accounting Period, Armstrong Corporation Reports

question 41

Multiple Choice

At the end of the accounting period, Armstrong Corporation reports operating income of $30,000. Which of the following statements is true, if Armstrong's inventory levels decrease during the accounting period?

• A) Variable costing will report less operating income than absorption costing.
• B) Absorption costing will report less operating income than variable costing.
• C) Variable costing and absorption costing will report the same operating income since the cost of goods sold is the same.
• D) Variable costing and absorption costing will report the same operating income since the total costs are the same.

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Definitions:

Work in Process

Stock consisting of materials that are in the process of being transformed into final products but have not reached completion.

Finished Goods

Items that have completed the manufacturing process but have not yet been sold to customers.

Raw Materials Inventory

Stocks of the basic materials that are required to manufacture goods, kept on hand.

Raw Materials

The fundamental components used to create or produce goods.