Routit Corporation Had the Following Sales and Production for the Past

question 109

Multiple Choice

Routit Corporation had the following sales and production for the past four years: Selling price per unit, variable cost per unit, and total fixed cost are the same each year. There were no beginning inventories in Year 1. Which of the following statements is correct?

• A)Under variable costing, net operating income for Year 3 and Year 4 would be the same.
• B)Under variable costing, net operating income for Year 2 and Year 3 would be the same.
• C)Variable costing net income would exceed absorption costing net income in Year 1.
• D)Absorption costing net income would exceed variable costing net income in Year 4.

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Definitions:

Excess Supply

A situation in a market where the quantity of a good or service available exceeds the quantity demanded at the current price, leading to surplus.

Scarcity

A basic issue in economics where human desires appear unlimited, but the world has finite resources.

Price of Contact Lenses

The cost at which contact lenses are sold, determined by factors like brand, technology, supply, and demand.

Supply of Contact Lenses

The total amount of contact lenses that manufacturers are willing and able to sell at a given price level.