The Level of Inventory of a Manufactured Product Has Increased

question 63

Multiple Choice

The level of inventory of a manufactured product has increased by 4,000 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)$44,000 decrease
• B)$44,000 increase
• C)$64,000 increase
• D)$64,000 decrease

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Definitions:

Proportions

Ratios or fractions that express the relationship of one part to another or to the whole with respect to quantity, size, or amount.

Profit

The financial gain achieved when the revenue from business activities exceeds the expenses, costs, and taxes needed to sustain the activity.

Production Function

A mathematical expression that describes the relationship between input factors of production (like labor and capital) and the output of goods or services.

Labor

Labor refers to the human effort, both physical and mental, used in the production of goods and services.