Which of the Following Formulas Can Often Reconcile the Difference

question 50

Multiple Choice

Which of the following formulas can often reconcile the difference between absorption-costing net income and variable-costing net income?

• A)Change in inventory units x Predetermined variable-overhead rate per unit.
• B)Change in inventory units ÷ Predetermined variable-overhead rate per unit.
• C)Change in inventory units x Predetermined fixed-overhead rate per unit.
• D)Change in inventory units ÷ Predetermined fixed-overhead rate per unit.
• E)(Absorption-costing net income - Variable-costing net income) x Fixed-overhead rate per unit.

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Definitions:

Equilibrium Price

The price at which the quantity of a good demanded by consumers equals the quantity supplied by producers.

Competitive Market

A market structure characterized by many buyers and sellers, free entry and exit, and a product for which each seller offers an essentially identical item.

Efficient Outcomes

An economic condition whereby resources are allocated in the most effective manner, maximizing overall welfare.

Demand Curves

Graphic representations showing the relationship between the price of a good or service and the quantity of that good or service people are willing and able to buy.