Other Things Being Equal, Income Computed by the Variable Costing

question 117

Multiple Choice

Other things being equal, income computed by the variable costing method will exceed that computed by the full costing method if:

• A) Units produced exceed units sold.
• B) Units sold exceed units produced.
• C) Fixed manufacturing costs increase.
• D) Variable manufacturing costs increase.

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Definitions:

Fixed Costs

Costs that do not change with the level of output or activity, over a certain period or range of production.

Variable Costs

Costs that vary directly with the level of production or service activity.

Exiting

The process of leaving or withdrawing from a situation, market, or competition, often used in the context of firms leaving an industry.

Break Even

Break even is a point at which total costs and total revenues are exactly equal, meaning there is no net loss or gain, and the business or project is just covering its expenses.