Which of the Following Statements Is True About the Difference

question 48

Multiple Choice

Which of the following statements is true about the difference in operating income between variable costing and absorption costing if the number of units in work-in-process and finished goods inventories increase?

• A) There will be no difference in net income.
• B) Operating income computed using variable costing will be higher.
• C) The difference in operating income cannot be determined from the information given.
• D) Operating income computed using variable costing will be lower.

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Definitions:

Price Mechanism

The way in which the forces of supply and demand determine the price of goods and services in a free market.

Efficient Allocation

The process where resources are distributed in a manner that maximizes the net benefits attained through their use.

Socialist Economy

An economic system where the production, distribution, and exchange of goods and services are controlled by the government with the aim of reducing inequality.

Public Ownership

The ownership of assets by the government or public entities rather than by private individuals or companies.