The Following Data Were Provided by Green Enterprises for the Most

question 85

Multiple Choice

The following data were provided by Green Enterprises for the most recent period:
$\begin{array} { | l | r | } \hline \text { Units in beginning inventory } & 0 \\\hline \text { Units produced } & 8,000 \\\hline \text { Units sold } & 6,000 \\\hline \text { Variable costs per unit: } & \\\hline \text { Manufacturing } & \$ 15 \\ \hline \text { Selling and administrative } &\$ 5 \\\hline \text { Fixed costs in total } & \\\hline \text { Manufacturing } & \$ 24,000\\\hline \text { Selling and administrative } & \$ 16,000\\\hline\end{array}$

-For the period noted,which of the following statements best describes the relationship between the operating income under absorption costing and under variable costing?

• A) Absorption costing operating income would be higher than the operating income under variable costing.
• B) Absorption costing operating income would be lower than the operating income under variable costing.
• C) Absorption costing operating income would be the same as the operating income under variable costing.
• D) The relationship between absorption costing operating income and variable costing operating income cannot be determined without additional information.

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Definitions:

Income Before Taxes

The profit a company generates from its operations before tax obligations are deducted.

Interest

The cost of borrowing money or the return on investment, typically expressed as a percentage of the principal amount.

Turnover

The rate at which employees leave a company and are replaced by new employees or the rate at which inventory is sold and restocked.

Average Operating Assets

A measure of the investment needed to generate the operating income of a company, averaged over a period.