How Is Operating Income Affected If the Number of Units

question 152

Multiple Choice

How is operating income affected if the number of units sold exceeds the number of units produced?

• A)Operating income would be higher under a variable costing income statement.
• B)Operating income would be lower under a variable costing income statement.
• C)Operating income would be higher under an absorption costing income statement.
• D)Operating income would be the same under both a variable costing and absorption costing income statement.

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Definitions:

Inflation Rate

The rate at which the general level of prices for goods and services is rising, and subsequently, purchasing power is falling, usually measured over a year.

Spot Rate

The current market price used for immediate delivery of a financial instrument or commodity.

Interest Rate

This is the proportion of a loan that is charged as interest to the borrower, typically expressed as an annual percentage of the loan outstanding.

Forward Rate Market

Refers to a financial market that deals with contracts specifying the rate at which currencies, securities, or commodities will be exchanged at a future date.