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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Definitions:

Business Investment

The act of allocating resources, usually in the form of capital, to create, expand, or improve a business's assets.

Required Reserves

The minimum amount of funds that a bank or depository institution must hold in reserve against specified deposit liabilities.

Excess Reserves

are the funds that banks hold over and above the required minimum reserves mandated by the central bank.

Federal Reserve Banks

Part of the central banking system of the United States, responsible for implementing monetary policy, providing financial services, and supervising and regulating banks.