What Is Red and White's Net Income Under Absorption Costing

question 65

Multiple Choice

What is Red and White's net income under absorption costing if 980 units are sold and operating expenses are $12,000?

• A) $(1,380)
• B) $(2,000)
• C) $2,700
• D) $6,620
• E) $10,620

---

Definitions:

Actual Amounts

Actual amounts refer to the true or real figures that have been recorded in financial transactions, not estimates or projections.

Flexible Budget

A budget that adjusts or flexes with changes in volume or activity levels, allowing for a more accurate comparison of actual vs. budgeted performance.

Predicted Amount

An estimated figure or value expected to be achieved in the future based on current data and trends.

Sales

The activities involved in selling products or services, ultimately resulting in revenue for the business.