Ringgold Company Experienced an Event That Affected Its Financial Statements

question 57

Multiple Choice

Ringgold Company experienced an event that affected its financial statements as indicated below: Which of the following accounting events caused the indicated effects on the company's accounting equation?

• A) Actual overhead cost was incurred
• B) Underapplied overhead was written off
• C) Estimated overhead was charged to production
• D) None of these answers are correct.

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Definitions:

Net Operating Income

Net operating income reflects the profit a company makes from its operations, exclusive of taxes and interest.

Variable Costs

are expenses that change in proportion to the activity of a business, such as raw material costs, which increase with the level of production.

Direct Labor

Factory labor costs that can be easily traced to individual units of product. Also called touch labor.

Contribution Margin

The amount by which sales revenue exceeds variable costs of production, indicating the contribution towards covering fixed costs.