The Level of Inventory of a Manufactured Product Has Increased

question 24

Multiple Choice

The level of inventory of a manufactured product has increased by 8,000 units during a period.The following data are also available: What would be the effect on income from operations if absorption costing is used rather than variable costing?

• A)$80,000 decrease
• B)$80,000 increase
• C)$104,000 increase
• D)$104,000 decrease

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Definitions:

Amortized

The process of gradually reducing a debt through periodic payments of principal and interest over a set term.

Ordinary Repairs

Expenditures for routine maintenance and upkeep of assets, charged as expenses to ensure the operational efficiency of an asset.

Plant Asset

Plant asset refers to long-term tangible property, plant, and equipment that a company uses in the production of its goods and services.

Operating Efficiency

A measure of how well a company uses its assets and liabilities internally to generate revenue.