When the Number of Units Sold Exceed the Number of Units

question 88

Multiple Choice

When the number of units sold exceed the number of units produced,income reported under absorption costing will be lower than variable costing.Which of the following gives the best justification of the above statement?

• A)Income under absorption costing is always less than income reported using variable costing,regardless of the number of units produced.
• B)Income under absorption costing is always more than income reported using variable costing,regardless of the number of units produced.
• C)The fixed overhead cost deferred in ending inventory is greater than the fixed overhead cost recognized from beginning inventory.
• D)The fixed overhead cost deferred in ending inventory is less than the fixed overhead cost recognized from beginning inventory.
• E)Fixed overhead is treated as a period cost under absorption costing.

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Definitions:

Aggregate Plan

A planning methodology in operations management aimed at determining overall output levels in the medium term to meet expected demand.

Aggregate Plan

A plan for production, inventory, and other resource levels, usually over an intermediate time frame, to meet expected demand.

Supply Chain

A system consisting of companies, individuals, processes, data, and assets engaged in the transportation of goods or services from the provider to the consumer.

Aggregate Planning

A process in operations management aiming to determine an optimal production plan to meet fluctuating demand in the medium term while minimizing costs.