What Factor Is the Cause of the Difference Between Operating

question 10

Multiple Choice

What factor is the cause of the difference between operating income computed using absorption costing and operating income computed using variable costing?

• A) Absorption costing considers all manufacturing costs in the determination of operating income, whereas variable costing considers only prime costs.
• B) Absorption costing allocates fixed manufacturing costs between cost of goods sold and inventories, and variable costing considers all fixed manufacturing costs as period costs.
• C) Absorption costing includes all variable manufacturing costs in product costs, but variable costing considers variable manufacturing costs to be period costs.
• D) Absorption costing includes all fixed manufacturing costs in product costs, but variable costing expenses all fixed manufacturing costs.

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Definitions:

Price Fixing

An illegal agreement among competitors to fix, control, or maintain the price of goods or services at a certain level, often leading to antitrust violations.

Antitrust Action

A legal step initiated to prevent or reduce anti-competitive practices, promoting fair competition in the market.

Competitive

Competitive refers to the characteristic of entities that are in a state of rivalry, vying for the same objectives or markets.

Chicago School

refers to a school of economic thought that promotes free-market principles and holds that economic freedom leads to economic development.