Which of the Following Is TRUE Concerning Operating Income Calculated

question 37

Multiple Choice

Which of the following is TRUE concerning operating income calculated under variable costing as compared to absorption costing?

• A)Operating income is lower under variable costing when production exceeds sales.
• B)Operating income is higher under variable costing when production exceeds sales.
• C)Operating income is lower under variable costing when sales exceeds production only if there is a production-volume variance.
• D)operating income is higher under variable costing when production exceeds sales only if there is a production-volume variance.
• E)The relationship between production and sales has no bearing on the differences in operating income between the two methods.

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Definitions:

Corporate Form

A legal structure for organizing a business as a separate legal entity, which can own property, enter into contracts, sue and be sued, distinct from its owners (shareholders).

Sole Proprietorships

Sole proprietorships are businesses owned and operated by one person, where there is no legal distinction between the owner and the business entity.

Business Organization

A legal entity formed to carry out commercial or industrial enterprises by engaging in trading, manufacturing, or providing services.

Financial Manager

A professional responsible for managing the financial health of an organization by overseeing investment activities and planning for the long-term financial strategy.