When Production Is Greater Than Sales,the Operating Income Will Be

question 205

Multiple Choice

When production is greater than sales,the operating income will be higher under absorption costing than variable costing.Assume zero beginning and ending inventories.Which of the following gives the correct reason for the above statement?

• A) All costs incurred have been recorded as expenses.
• B) A portion of the fixed manufacturing overhead is still in the ending Finished Goods Inventory account under absorption costing.
• C) All selling and administrative expenses have been recorded as period costs.
• D) Fixed manufacturing costs have not been considered when calculating the operating profits.

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