In Its First Year of Business,Greenlam Inc

question 30

Multiple Choice

In its first year of business,Greenlam Inc.produced and sold 600 units.If Greenlam uses variable costing,________.

• A)its operating profit for the period will be higher than absorption costing
• B)its operating profit for the period will be lower than absorption costing
• C)its value of ending inventory reported in the balance sheet will be higher than absorption costing
• D)its operating profit will be the same under absorption costing

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Definitions:

Inventories

Quantifiable goods or materials that a business holds for the purpose of sale in the ordinary course of business, production, or use.

Job-Order Costing

A cost accounting system that collects costs individually for each job, suitable for customized orders or distinctly identifiable products.

Overapplied Overhead

A situation where the overhead allocated to products or services is more than the actual overhead incurred.

Cost of Goods Sold

The direct costs attributable to the production of the goods sold by a company, including the cost of the materials and labor directly used to create the goods.