Which of the Following Statements Is True for a Firm

question 45

Multiple Choice

Which of the following statements is true for a firm that uses variable costing?

• A) The unit product cost changes as a result of changes in the number of units manufactured.
• B) Both variable selling costs and variable production costs are included in the unit product cost.
• C) Operating income moves in the same direction as sales.
• D) Operating income is greatest in periods when production is highest.

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Definitions:

Percentage of Credit Sales Method

An accounting method used to estimate bad debt expense by applying a fixed percentage to the total credit sales of a period.

Credit Sales

Sales made by a business on credit, where payment is collected at a later date.

Bad Debt Expense

The estimated amount of receivables that a company does not expect to collect.

Uncollectible Account Receivable

A receivable that is considered unlikely to be collected, representing a loss to the company.