What Is Red and White's Net Income Under Absorption Costing

question 189

Multiple Choice

What is Red and White's net income under absorption costing if 980 units are sold and selling and administrative expenses are $12,000?

• A)$(1,380)
• B)$(2,000)
• C)$2,700
• D)$6,620
• E)$10,620

---

Definitions:

After-Tax Cash Outlay

The net cash expense after adjusting for taxes, often relevant in capital budgeting and investment analysis.

Book Value

The net value of a company's assets minus its liabilities, as recorded on the balance sheet.

Incremental Impact

Refers to the additional effects or outcomes resulting from a specific action or decision in comparison to doing nothing or choosing an alternative.

Production Workers

Employees engaged in the manufacturing process whose primary responsibilities involve producing goods and services.