The Following Data Pertain to One Month's Operations of Whitney

question 16

Multiple Choice

The following data pertain to one month's operations of Whitney, Inc.:
$\begin{array} { | l | r | } \hline \text { Units in beginning inventory } & 0 \\\hline \text { Units produced } & 9,000 \\\hline \text { Units sold } &8,000 \\ \hline \text { Variable costs per unit: } & \\\hline \text { Manufacturing } & \$ 10 \\\hline \text { Selling and administrative } & \$ 6 \\\hline \text { Fixed costs in total } & \\\hline \text { Manufacturing } & \$ 18,000 \\\hline \text { Selling and administrative } & \$ 27,000 \\\hline\end{array}$

-For the month noted,what was the relationship between the operating income under variable costing as opposed to under absorption costing?

• A) Higher than operating income under absorption costing.
• B) Lower than operating income under absorption costing.
• C) The same as operating income under absorption costing.
• D) The relationship between variable costing and absorption costing operating income cannot be determined with the data provided.

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Definitions:

Bad Debts Expense

Bad debts expense represents the recognition of accounts receivable that are not expected to be collected, impacting a company's financial statements.

Allowance for Doubtful Accounts

A reserve for accounts receivable that a company does not expect to collect in full, acknowledging some customers may not pay their debts.

Allowance for Doubtful Accounts

A contra-asset account used to create an estimated reserve for debts that may not be collected.

Bad Debts Expense

An expense reported on the income statement, representing the estimated amount of credit sales that are not expected to be collected.