Bella Ltd Has Operated for 2 Years

question 23

Multiple Choice

Bella Ltd has operated for 2 years. During that time it produced 1,000 units in year 1 and 800 in year 2, while sales were 800 units in year 1 and 900 in year 2. Variable production costs were $8 per unit during both years. The company uses last-in, first-out (LIFO) for inventory costing. The absorption costing income statements for these 2 years were: Operating profit for year 2 using variable costing would be

• A) $1,000
• B) $1,600
• C) $4,000
• D) $1,450

---

Definitions:

Depreciation Expense

The allocated portion of the cost of a tangible asset over its useful life, recognized as an expense on a company's income statement.

General Liability Insurance

General Liability Insurance is a type of insurance policy that provides cover to a business for bodily injury, personal injury, and property damage caused by the business’s operations, products, or injuries that occur on the business’s premises.

Adjusting Journal Entry

An entry in accounting that is made at the end of an accounting period to record any unrecognized income or expenses for the period.

Asset

An item of value owned by an individual or corporation that is expected to provide future economic benefits.