One Possible Means of Determining the Difference Between Absorption and Variable

question 91

Multiple Choice

One possible means of determining the difference between absorption and variable costing based operating incomes is

• A)to add fixed manufacturing cost to the variable costing operating income.
• B)by subtracting the variable overhead rate from the fixed overhead rate and then multiplying the difference by the number of units in inventory.
• C)by subtracting fixed manufacturing overhead in beginning inventory from fixed manufacturing overhead in ending inventory.
• D)by multiplying the number of units produced by the budgeted fixed manufacturing overhead rate.
• E)by adding fixed manufacturing overhead in beginning inventory to income.

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Definitions:

Put Option

This is a financial deal which provides the participant the freedom, but not the compulsion, to part with a given amount of a principal asset at an established cost during a set span.

Market Price

The existing rate at which a service or asset is available for buying or selling in a market environment.

Put Option

A contractual financial arrangement allowing the option holder to sell a designated quantity of an underlying asset at a fixed price before a certain deadline, without any compulsory action.

Strike Price

The fixed price at which the holder of an option can buy (in the case of a call option) or sell (in the case of a put option) the underlying asset.