If the Number of Units Sold Exceeds the Number of Units

question 309

Multiple Choice

If the number of units sold exceeds the number of units produced, how is operating income affected?

• A) Operating income would be the same under both a variable costing and absorption costing income statement.
• B) Operating income would be lower under a variable costing income statement.
• C) Operating income would be higher under an absorption costing income statement.
• D) Operating income would be higher under a variable costing income statement.

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Definitions:

Incremental Costs

Incremental costs refer to the additional costs that a company incurs when increasing its production or activities by a small amount, also known as marginal costs.

Accumulated Depreciation

The total amount of depreciation expense recorded for an asset over its life.

Net Advantage

A term used in various contexts to indicate the superiority or benefit achieved by one option over another, often evaluated in decision-making scenarios.

Annual Operating Costs

The yearly expenses associated with running a business, excluding costs associated with the production of goods or services.