A $3,000 Increase in Total Owners' Equity Occurs If Treasury

question 20

True/False

A $3,000 increase in total owners' equity occurs if treasury stock costing $11,500 is sold for $14,500.

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Definitions:

Absorption Costing

Accounting method that includes all manufacturing costs - direct materials, direct labor, and both variable and fixed manufacturing overhead - in the cost of a product.

Unit Product Cost

The cost calculated per unit, combining all expenses including materials, labor, and overhead related to the production.

Variable Costing

A method of accounting that comprises solely of variable production expenses, such as direct materials, direct labor, and variable manufacturing overhead, in the calculation of product costs.

Variable Costing

An accounting method that includes only variable costs (costs that change with production levels) in product costs and treats fixed costs as period expenses.