Rubble Enterprises Develops an Annual Overhead Budget at the Start

question 40

Multiple Choice

Rubble Enterprises develops an annual overhead budget at the start of each year (which has remained unchanged for the last 2 years) , and closes any over- or underapplied overhead at year-end. For the firm's single product the following ending inventory levels have been experienced during the last 7 months: Month Units
December 31 300
January 31 300
February 28 200
March 31 400
April 30 300
May 31 400
June 30 500
In how many months would variable costing income be lower than absorption costing income?

• A)1
• B)2
• C)3
• D)4

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Definitions:

Simple Delivery Contract

A type of contract involving the transfer of ownership of specific goods or property from the seller to the buyer upon delivery.

Merchant

An individual or business entity engaged in the selling and purchasing of goods or services.

FOB

An incoterm meaning "Free on Board," which indicates that the seller is responsible for goods until they are loaded on a shipping vessel, at which point the responsibility shifts to the buyer.

Shipping Term

A term used in contracts to specify the responsibilities of buyers and sellers regarding the transportation of goods.