For the Period Above, One Would Expect the Net Operating

question 54

Multiple Choice

For the period above, one would expect the net operating income under absorption costing to be:

• A)higher than the net operating income under variable costing.
• B)lower than the net operating income under variable costing.
• C)the same as the net operating income under variable costing.
• D)The relation between absorption costing net operating income and variable costing net operating income cannot be determineD.When production exceeds sales, net operating income under absorption costing will always be higher than under variable costing.A portion of fixed manufacturing cost will be deferred in ending inventory rather than being included in the income statement.

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Definitions:

Forced Liquidation

The rapid sale of assets by a borrower who must sell these assets because of financial distress and cannot meet an obligation with cash flow.

Measurement Date

The specific point in time at which the value of an asset or liability is determined for accounting purposes, often used in reference to financial instruments or employee stock options.

Highest Use

An appraisal concept referring to the most probable use of a property or asset that is legally permissible, physically possible, financially feasible, and maximally productive.