When Units Manufactured Exceed Units Sold

question 26

Multiple Choice

When units manufactured exceed units sold:

• A) variable costing income equals absorption costing income
• B) variable costing income is less than absorption costing income
• C) variable costing income is greater than absorption costing income
• D) variable costing income is greater by the number of units produced multiplied by the variable cost ratio.

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Definitions:

Unrecognized Net Gain

A profit that has been realized but not yet recorded in the financial statements of a company.

Projected Benefit Obligation

The present value of estimated future pension benefits owed to employees, based on expected salary increases.

Prior Service Cost

Costs that arise when a pension plan is amended to increase benefits for employee service provided in prior periods, recognized over the service periods of affected employees.

Unrecognized Prior Service Cost

Costs associated with retroactive benefits granted in pension plans, which are not immediately recognized as an expense but are amortized over time.