BC Company Has a Gross Profit Percentage of 61% While

question 72

Multiple Choice

BC Company has a gross profit percentage of 61% while AB Company has a gross profit percentage of 37%.Which of the following is true?

• A)BC Company will report a higher net income than AB Company.
• B)AB Company must have a greater sales volume than BC Company.
• C)BC Company must be more efficient at controlling selling,general,and administrative expenses than AB Company.
• D)None of the answers are acceptable.

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Definitions:

Activity-Based Costing

A costing method that assigns costs to products based on the activities it requires for production, aiming for more accurate product costing.

Overhead Assigned

The allocation of indirect costs to specific products or cost objects.

Traditional Costing

A costing methodology that allocates manufacturing overhead costs to products based on a predetermined rate, often volume-based such as labor hours or machine hours.

Direct Labor-Hours

An evaluation of the cumulative hours spent directly in the manufacturing of products.