Kern Corporation Produces a Single Product

question 131

Multiple Choice

Kern Corporation produces a single product. Selected information concerning the operations of the company follow:
Assume that direct labor is a variable cost.
-Which costing method,absorption or variable costing,would show a higher operating income for the year and by what amount?

• A) Absorption costing net operating income would be higher than variable costing net operating income by $2,500.
• B) Variable costing net operating income would be higher than absorption costing net operating income by $2,500.
• C) Absorption costing net operating income would be higher than variable costing net operating income by $5,500.
• D) Variable costing net operating income would be higher than absorption costing net operating income by $5,500.

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Definitions:

Method of Substitution

A technique used to solve systems of equations by solving one equation for one variable and substituting that expression into the other equation.

System of Equations

A set of equations with the same variables, which are solved together to find a common solution for those variables.

Method of Elimination

A technique used to solve systems of equations by eliminating one of the variables.

System of Equations

A set of equations with the same variables, which are solved together to find a common solution.