Ways to "Produce for Inventory" That Result in Increasing Operating

question 26

Multiple Choice

Ways to "produce for inventory" that result in increasing operating income include ________.

• A) switching production to products that absorb the least amounts of fixed manufacturing costs
• B) delaying items that absorb the greatest amount of fixed manufacturing costs
• C) switching production to products that absorb the most amounts of fixed manufacturing costs
• D) undervaluing ending inventory by not recording certain costs that have been incurred

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Definitions:

Contribution Margin

The difference between sales revenue and variable costs, indicating how much revenue contributes to covering fixed costs and generating profit.

Net Operating Income

A measure of the profitability of a business's core operational activities, excluding any income or expenses not directly related to its main operations.

Sales Volumes

The quantity of products or services sold by a company within a specific period.

Contribution Margin Per Unit

The difference between the selling price per unit and variable cost per unit of a product.