In an Income Statement Prepared Using Variable Costing, Fixed Manufacturing

question 20

Multiple Choice

In an income statement prepared using variable costing, fixed manufacturing overhead would

• A)not be used.
• B)be used in the computation of net operating income but not in the computation of the contribution margin.
• C)be used in the computation of the contribution margin.
• D)be treated the same as variable manufacturing overheaD.

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Definitions:

Expense Warranty Accrual Method

An accounting method where expected future warranty claim costs are estimated and recorded as an expense at the time of sale.

Liability For Warranties

The responsibility of a company to cover costs of addressing defects or repairs under warranty for sold products.

Income After Bonus

The portion of a company's income that remains after paying out bonuses to employees. This figure helps assess the company's net profitability after distributing employee incentives.