The Following Data Pertain to One Month's Operations of Whitney

question 16

Multiple Choice

The following data pertain to one month's operations of Whitney, Inc.:
$\begin{array} { | l | r | } \hline \text { Units in beginning inventory } & 0 \\\hline \text { Units produced } & 9,000 \\\hline \text { Units sold } &8,000 \\ \hline \text { Variable costs per unit: } & \\\hline \text { Manufacturing } & \$ 10 \\\hline \text { Selling and administrative } & \$ 6 \\\hline \text { Fixed costs in total } & \\\hline \text { Manufacturing } & \$ 18,000 \\\hline \text { Selling and administrative } & \$ 27,000 \\\hline\end{array}$

-For the month noted,what was the relationship between the operating income under variable costing as opposed to under absorption costing?

• A) Higher than operating income under absorption costing.
• B) Lower than operating income under absorption costing.
• C) The same as operating income under absorption costing.
• D) The relationship between variable costing and absorption costing operating income cannot be determined with the data provided.

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Definitions:

Least-Squares Regression

A statistical method used to determine a line of best fit by minimizing the sum of the squares of the differences between observed values and those predicted by the model.

Inspection Cost

Expenses associated with the activities necessary to ensure that products or services meet the required standards and specifications.

Contribution Format

A format for the income statement that divides variable costs from fixed costs to emphasize the contribution margin.

Fixed Expenses

Costs that do not vary with the level of output or sales, such as rent and salaries.