Khanam Corporation, Which Has Only One Product, Has Provided the Following

question 147

Multiple Choice

Khanam Corporation, which has only one product, has provided the following data concerning its most recent month of operations: The company produces the same number of units every month, although the sales in units vary from month to month.The company's variable costs per unit and total fixed costs have been constant from month to month. What is the net operating income for the month under absorption costing?

• A)$8, 500
• B)$9, 300
• C)$3, 200
• D)$15, 100

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Definitions:

Variable Costing

Variable costing is an accounting method that only considers variable costs, which change with production levels, in the cost of goods sold and excludes fixed manufacturing overhead.

Income Statement

A financial statement that shows a company's revenues, expenses, and profits over a period of time.

Absorption Costing

An approach to pricing that involves including every manufacturing expense - like direct materials, direct labor, as well as fixed and variable overheads - in calculating the cost of a product.

Income Statement

A financial statement that reports a company’s financial performance over a specific accounting period.