One Possible Means of Determining the Difference Between Operating Incomes

question 2

Multiple Choice

One possible means of determining the difference between operating incomes for absorption costing and variable costing is by ________.

• A) subtracting sales of the previous period from sales of this period
• B) subtracting fixed manufacturing overhead in beginning inventory from fixed manufacturing overhead in ending inventory
• C) multiplying the number of units produced by the budgeted fixed manufacturing cost rate
• D) adding fixed manufacturing costs to the production-volume variance

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Definitions:

Income Statement

A financial report that shows the company’s revenues and expenses over a specific period, resulting in net profit or loss.

August 31

A specific calendar date, often marking the end of a month or a deadline for certain financial or administrative tasks.

Net Income

The profit a company holds onto after subtracting expenses and taxes from its accumulated revenues.

Common Stock

A type of equity security that represents ownership in a corporation, providing voting rights and a residual claim on corporate earnings and assets.