Assuming the Number of Units Sold and Produced Are the Same,which

question 85

Multiple Choice

Assuming the number of units sold and produced are the same,which of the following statements is true when comparing net income using absorption and variable costing?

• A) Absorption costing will yield a higher net income.
• B) Variable costing will yield a higher net income.
• C) Net income will be the same under both methods.
• D) Variable costing will have higher sales revenue.

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Definitions:

Marginal Revenue Product

The additional revenue generated by employing one more unit of a resource, such as labor or capital, holding all other input factors constant, crucial in determining how many resources a firm should hire or use.

Productivity

A measure of the efficiency of production, usually calculated as the ratio of output produced to inputs used.

Marginal Revenue Product

is the additional revenue generated by employing one more unit of input, such as labor or capital, in the production process.

Variable Factor

An input in production that can be varied in the short term, such as labor or raw materials, in contrast to fixed factors like machinery or land.