When Comparing the Operating Incomes Between Absorption Costing and Variable

question 101

Multiple Choice

When comparing the operating incomes between absorption costing and variable costing, and ending finished inventory exceeds beginning finished inventory, it may be assumed that ________.

• A) sales decreased during the period
• B) variable cost per unit is more than fixed cost per unit
• C) there is a favorable production-volume variance
• D) absorption costing operating income exceeds variable costing operating income

Recognize the difference between expected value and expected utility.

Determine utility levels from given income data.

Learn the concept of fair and unfair bets in the context of expected outcomes.

Understand how marginal utility of income varies with risk preferences.

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Definitions:

Credits

Accounting entries that increase liabilities or equity or decrease assets, reflecting the sources of funding or income.

Trial Balance

A bookkeeping worksheet in which the balances of all ledgers are compiled into debit and credit account columns to check the accuracy of financial recordings.

Journal Entries

Records of financial transactions entered into an accounting system, ensuring that the debits equal the credits in financial accounting records.

Cash

Liquid assets held by an individual or company, which include currency and demand deposits readily available for transactions.