Smith Company Had Net Operating Income of £125,000 Using Variable

question 61

Multiple Choice

Smith Company had net operating income of £125,000 using variable costing and £105,000 using absorption costing. Variable production costs were £20 per unit. Total fixed manufacturing overhead was £176,000 and 11,000 units were produced. During the year, the stock level

• A)increased by 1,000 units.
• B)increased by 1,250 units.
• C)decreased by 1,000 units.
• D)decreased by 1,250 units.

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Definitions:

Economic Income

The total value of all earnings over a period, including wages, salaries, bonuses, and any earnings from investments.

Net Worth

The total value of an individual's or organization's assets minus liabilities.

Consumption

The use of goods and services by households, considered as the end component of economic activity where goods or services are utilized.

Vertical Equity

A principle of taxation that posits taxpayers with higher incomes should pay more in taxes than those with lower incomes, based on the ability to pay.